One of the simplest ways to make money in financial markets is to trade on price-sensitive information ahead of everyone else. As the apocryphal story goes, Nathan Mayer Rothschild had great success on the government bond market in 1815 by learning about the outcome of the Battle of Waterloo before other investors.
Trading on inside information these days tends to result in jail time. But the Big Data revolution, combined with the application of machine learning technologies and supercomputing powers, is creating a whole new class of information that can give investors a legal edge. “We are living through a data explosion,” says Tammer Kamel, founder and chief executive of Quandl, a Toronto-based data company. “Every person, every machine, every computer is creating data. And explicitly or implicitly embedded in all this data are little nuggets of alpha.” Mr Kamel was among a clutch of data scientists, investors and artificial intelligence experts discussing this information revolution at a Newsweek conference in London last week. The conclusion: we are at the dawn of an intriguing new era in sourcing, collating and analysing a welter of unconventional, market-relevant information. First, advances in technology are creating fresh and accessible data sources, such as satellite imaging. One company active in this area, Orbital Insight, explained that it was now possible to use satellites to scour the world for actionable intelligence in near-real time.
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