What Data are Important

Back to my long time look at data as an asset.  "Alternative Data Sets'  is a term I had not heard of mentioned here.  Because of new uses of data, we do need more and more accurate data, usually in more specific contexts and decisions.    Podcast and transcript:

Wharton's Christina Zhu discusses her research on how Big Data can inform investment decisions.

If a little is good, more must be better. But that axiom isn’t always true when it comes to big data. In her latest research, Wharton accounting professor Christina Zhu finds that investors and managers need more than just reams of information to make good decisions. They need to know what data are important and how to use them. Zhu spoke to Knowledge@Wharton about her paper, “Big Data as a Governance Mechanism,” which was recently published in The Review of Financial Studies.

An edited transcript of the conversation follows.

Knowledge@Wharton: In this paper, you’re focusing on how investment managers interact with something called alternative data sets. Can you explain what those are and how they contrast with types of information they would typically use?

Christina Zhu: Typically, when we think about financial information or accounting information, we think of financial statements or analyst reports. When I say alternative data, I mean data that are not coming from companies’ financial reports. These are data that can include anything ranging from consumer transactions and credit card statements to satellite images of cars in parking lots. Because all of these data are available now, investment managers are trying to get as much data as they can to make better investment decisions. These are data that are even more granular and provide information in a more timely manner than they have gotten before.

Knowledge@Wharton: How much more data do investment managers have at their fingertips now than in the past? And how does that make it more challenging to sift through and figure out what matters?  ... "