Tag Archives: importance of information

Ubiquitous Data and Investing

Published: February 21, 2014

By: Kevin Coogan

Data is ubiquitous. Historians will likely peg the moment we as a society figured this out right around now. It will be seen as slightly after the infatuation with social media began to wear off, as Big Data became a buzzword and slightly before we realized that true privacy is antiquated.

The implications for almost all sectors are enormous, but for finance it seems like its impact will be immediate and universal.

The financial markets are a pricing mechanism and that mechanism relies on data. Looking at the most basic building blocks of investment theory, we see that data (or information) sits at its core. Investors simply would not be able to efficiently and effectively price an asset without relevant data.

Access to superior information has long been known as an advantage in the market. Taken to an extreme investors began to seek privileged information – which has been aggressively regulated in an attempt to create a level playing field. A company announcing its revenues or a round of layoffs, or the government announcing macro-economic data, like inflation or employment figures, is tightly controlled information which is often released to the market at specific times and in specific forums.

If data is ubiquitous, however, can such data be truly concealed until that final announcement? This does not infer data leaks or insider information. Data being everywhere, with increasingly interesting and novel collection and analysis, implies that clues are left for those willing to hunt for them. Finance in the 21st century will heavily rely upon discovering and leveraging these new sources of data and new analytics to get to insight prior to the ‘big’ announcement.

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