Big data is now widely recognized as integral to the operations of the majority of businesses and organizations, and the investment industry is embracing the opportunities that big data presents.
Big data is fundamentally about information and its analysis, and since professional investment decisions are based on information, it stands to reason that the more information investors have and the better that data is analyzed, the more accurately they can predict the rise and fall of stocks, shares, and other forms of investment.
Traditional forms of investment data
Trading decisions have always been based on the best information available at the time, beginning with the company’s history, future prospects, and financial statements. This would be supplemented with current market information, including pricing, margins, growth, and debts.
These forms of information have been used since the inception of trading and serve as the basis for a broker’s buying and selling decisions, but there are now additional, more potent information sources that are expanding the knowledge base.
New forms of investment data
The expansion of the Internet and the information sharing it enables are crucial to the use of big data. There are numerous types of information that can be captured and analyzed based on specific needs, including web traffic statistics, patent applications, spoken information such as interviews, information written in other languages, and even satellite images.
How new forms of data are used
When evaluating future prospects for potential investment decisions, traders seek out companies with the optimal combination of characteristics to ensure the highest return on investment. It is prudent to invest in stocks, such as beyond meat shares, with strong earnings performance and expansion plans.
By gathering as much information as possible and using it to calculate the likelihood of a business’s success, traders can make the most accurate decisions and, as a result, incur fewer losses than gains.
Big data is adding a new dimension to this information pool by providing insights that were previously too complex or difficult to analyze. Due to advances in technology, it is now possible to analyze data that is difficult to quantify, unstructured, or disorganized.
The development of high-speed data capture and analysis methods is the key to unlocking the information contained in the vast quantities of data that are now possible to collect.
What do investors gain from big data?
Each piece of information lends credibility to the assessment process for a potential investment. Some of the most valuable insights for traders are gained when previously difficult-to-quantify investment themes, such as momentum, can be defined more readily.
By utilizing big data to provide information that other market participants may not have access to, you can gain an advantage over other traders and secure profitable investments before your competitors. The more information you have about a potential investment, the greater your advantage over those who base their decisions on conventional data sources.
The information extracted from big data is used to identify new investment factors that aid traders in enhancing their stock selection and allow them to test their ideas and strategies to inform future decisions.
People are still the key to sound investing
Data is merely a collection of information, and it must be analyzed and evaluated by knowledgeable individuals who can get to the heart of what the data is telling you. The ultimate decisions must be based on human judgment, which is informed by data on the one hand and skilled, experienced individuals with the ability to interpret it on the other.
It is comparable to having a ton of dirt and sifting through it to find the gold dust that will make you rich. People like Michael Robinson, investor extraordinaire, have years of experience successfully mining for gold among the rubble, and machines cannot yet replicate these skills.
What does the future hold?
The development of big data analytics is accelerating, and it is anticipated that as data collection and analysis become increasingly sophisticated, big data will play an increasingly important role in the success of investments. There are still obstacles, especially in emerging markets where data availability is limited.
Companies from all over the world are entering emerging markets, but information recording and data quality standards vary greatly from country to country. This indicates that there are still significant gaps in the quantity and quality of data that can be used to evaluate emerging markets.
As with all obstacles, the gaps in data availability present an opportunity for traders with experience and analytical technologies to gain a competitive edge by monitoring data sources and incorporating as many of them as possible into their knowledge base.
The greater the utilization of big data to gain market insights, the larger the knowledge base upon which decisions are made. In turn, the analysis of the data and decisions made based on the acquired knowledge can be further analyzed in light of the outcomes of trading decisions, providing evidence that either supports or contradicts the actions taken.
It is impossible to predict how influential big data will be for investors in the future, but there is no doubt that it is playing an increasingly vital role in the investment industry.
It is possible that as technology advances, computer systems will be able to collect, analyze, and cross-reference all available information so efficiently and effectively that the need for human input will diminish or even disappear.
Considering the introduction of investor bots and artificial intelligence to manage the more straightforward aspects of making investments, it would seem logical to combine the two technologies.
If computers replace humans, it won’t happen anytime soon. Currently, investments require the guidance of human computing power to realize their full potential, but this will soon change.