Chances are, you are reading this on a digital device. You will have gotten here by clicking your mouse or tapping that screen a few times to open an email, select a link and identify your investor status on our website. Perhaps you are reading it on the train? You probably used a travelcard to get onto the platform — with two or three CCTV cameras watching you do it, and some satellites, too, if your phone has GPS technology. Maybe you’ll enjoy this enough to share the link on Twitter or LinkedIn.
Every minute of every day, we are all generating data. Mountains of it.
In fact, IBM has claimed that human beings, with all of their new devices, sensors and other technologies, generate 2.5 quintillion bytes (yes, that’s QUINTILLION!) of data every day. To put it another way, 90 per cent of all the data that has been created since the beginning of human history has been created in the past two years.
Digital residue
The proliferation of these sets of so-called Big Data was behind Neuberger Berman’s decision to appoint its first Chief Data Scientist, Michael Recce. Michael, who has a background in machine learning and artificial intelligence, has a name for the things I described in my first paragraph: “digital residue.”
We can learn a lot about a public company from its accounting statements. That is why stock prices tend to exhibit bigger moves during “earnings season,” when this information is made public.
But that information can be dramatically enhanced with the digital residue left — often in real time — by that company, its partners in the supply chain, its customers and the media (both social and otherwise). Properly collected, monitored and analysed, it can uncover unseen patterns at the macroeconomic, industry and company level.
We envision Big Data helping us to discern intermediate- to longer-term fundamental trends, and ultimately enabling us to make better investment judgements as a result. We don’t foresee playing the “incremental data-point game” — trying to trade securities frequently to take advantage of some minor data point leading to small moves in securities pricing. We are not traders, we’re investors.
Quantamental
In our view, the Big Data holy grail in investment management will be the combination of good, old-fashioned fundamental analysis with quantitative investment techniques — what we call the “quantamental” approach.
“Quants” are typically far more advanced in their portfolio construction and risk management approach, but can sometimes be susceptible to looking too much at past patterns of market movements. Fundamental managers focus much more on forward-looking analysis, such as trying to predict the future course of earnings growth. Big Data can feed naturally into both of these two worlds.
Bringing human intuition and judgement together with machine learning and bringing informed forecasts together with historical patterns, a “quantamental” approach gives investors a 360-degree view of their companies and the world in which they operate. Big Data has the potential to give that view depth, granularity and timeliness. We believe this is the new frontier of investment research.
(Gulf)
No comments:
Post a Comment