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Digital Subscriptions > The Hedge Fund Journal > Issue 136 – Nov 2018 > Nasdaq’s Alternative Data Insights

Nasdaq’s Alternative Data Insights

Vetting, curating, and testing data

Nasdaq Analytics Hub launched in May 2017 and soon after released a White Paper “Intelligent Alpha”. This highlights how harnessing certain alternative datasets: twitter sentiment; retail investor sentiment inspiredshorts; parsed central bank communiqués; and selected corporate fillings – could have historically generated substantial outperformance over multiyear periods. The analysis applies to both long only and hedge fund investors, based on back-tests.

The costs of using alternative data include both vendor fees, and the internal resources that asset managers might devote to cleaning, managing, analysing, storing, and testing the data. “Analytics Hub could be cheaper, more convenient and more efficient, as its structure, APIs, formats, identifiers, assumptions, legal support, and service level agreements, are all standardised. This means that operations and administration are more efficient, and the offering is at least as good as asset managers would get by dealing direct with a provider,”argues Bill Dague, Nasdaq’s Head of Alternative Data. Under the common delivery umbrella, clients can pick from a growing menu which datasets to subscribe to. The curated datasets alert asset managers to potential predictive power in data and Nasdaq can provide generic case studies showing how the data might be used. But it is for the investors to determine how to use the data for signal generation, portfolio construction, risk management and so on, in the context of their own strategies.

Sourcing, vetting and storing data

“Essentially any non-financial data is potentially in scope, so Analytics Hub casts the net as wide as possible,”says Dague. The group has so far seen 450 different providers of data, and researched a wide array of data sources. “We take care to see that data is sourced legally, is likely to have some longevity, and that the company has an incentive structure that makes sense. These criteria screen out a lot of companies!”says Dague.

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