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Alternative Data (Finance)

Definition


Alternative data is non-traditional (not price or volume) data that has predictive value in the financial markets.

Description


The 5 popular types of alternative data are:

  • Location Data
  • Consumer Expenditure Data
  • Satellite/Drone Imagery
  • Weather Data
  • Web-scrapped Data

Alternative data is used by hedge funds and financial institutions to find profitable opportunities in the markets.

Hedge funds either buy these data from data providers or collect them themselves.

Examples of Alternative Data in Action


  • Satellite images of Walmart parking lots allow hedge fund to analyze the change in the number of people going to Walmart. This enables them to predict Walmart’s sales figures.
  • Surveyors record the number of trucks leaving Company A’s factories. This data allows traders to predict Company A’s revenue.
  • Having social media foot traffic data (such as Foursquare’s check-in data) around Restaurant X’s outlets allows traders to predict Restaurant X’s sales figures.

Examples of Alternative Data

  • Geolocation data
  • Foot traffic data
  • Credit card data
  • Point-of-Sales data
  • Email Receipts
  • Satellite Images
  • Drone Images
  • Search Traffic
  • Job Listings
  • Web Reviews
  • Rainfall Levels

Links to Complicated Explanations´╗┐


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