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The Key to Unlocking Alpha: The Data You Didn’t Know You Needed

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By Brandon Tepper, Senior Vice President and Global Head of Data at Nasdaq.

Markets can be up or down, volatile or steady, good or bad. But what is consistent is that companies and investors need to make important data-driven decisions to properly navigate them. The difference between success and failure lies in what types of data we turn to at each stage, and how we pivot when the time is right.

In my role as the Global Head of Data at Nasdaq, our clients include institutional investors, retail brokerages, fintechs and information portals – all of whom come to Nasdaq with their data needs, visions and questions. Over the past few years in particular, I’ve seen investors tap a variety of data products in different ways to make it through a rollercoaster of economic environments. In the current environment, the data that investors rely on to make better decisions can look quite different than the data they sought in the years prior.

The shift from quantity to quality of data has become more complicated with time. A decade ago, when alternative data first gained popularity, any novel dataset seemed to offer alpha – everything was new, and everything was exciting. Now, investors must commit even more time to scour to find increasingly niche datasets that might offer actionable, unique insights.

So, what are some datasets and tools fuelling investor activity in the current market environment?

When market uncertainty is high, datasets that give investors an informational edge – such as retail trading activity and commodities flows – become even more important because they can help investors identify outsized opportunities and mitigate risk. Having reliable information is crucial and the ability to ingest and deploy data for alpha becomes vital, especially given the rise of AI across the industry.

One dataset my team has been seeing renewed interest in lately covers commodities data. By tracking daily aggregate holdings across the global commodities market, investors can receive a clearer and more up to date picture of activity as well as the positioning of other investors. During periods of economic uncertainty – and a year of generally lower commodity prices – insights such as these, which can offer even the slightest edge in the markets, are highly sought after.

With conference season in full swing, investors are also looking into corporate travel and hotel bookings as an economic indicator for increased activity in particular regions and sectors. Corporate hotel bookings data can even provide an inside look into more specific movements within the hospitality industry and allow investors to get an early read on the performance of major airline and hotel companies.

At a higher level, over the past few years, we’ve found that investors are increasingly taking an always-on approach to their use of data. Whereas a decade ago the use of so-called alternative data felt more limited and specific – to get a read on potential M&A activity, to get ahead of corporate earnings, to slightly improve quantitative traders’ models – what we’re seeing now is an industry that is run by, not just augmented by, data. Data was famously called “the new oil,” but for investors, it may be the new water, especially with an increased focus on sustainability.

With the data needs of investors continuing to evolve, data providers are also always adjusting their offerings and platforms. While this year investors may be focused on the market moves of the largest corporations, next year’s data demands may look entirely different – and everyone will need to adjust accordingly.

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