Connect with us

Global Banking and Finance Review is an online platform offering news, analysis, and opinion on the latest trends, developments, and innovations in the banking and finance industry worldwide. The platform covers a diverse range of topics, including banking, insurance, investment, wealth management, fintech, and regulatory issues. The website publishes news, press releases, opinion and advertorials on various financial organizations, products and services which are commissioned from various Companies, Organizations, PR agencies, Bloggers etc. These commissioned articles are commercial in nature. This is not to be considered as financial advice and should be considered only for information purposes. It does not reflect the views or opinion of our website and is not to be considered an endorsement or a recommendation. We cannot guarantee the accuracy or applicability of any information provided with respect to your individual or personal circumstances. Please seek Professional advice from a qualified professional before making any financial decisions. We link to various third-party websites, affiliate sales networks, and to our advertising partners websites. When you view or click on certain links available on our articles, our partners may compensate us for displaying the content to you or make a purchase or fill a form. This will not incur any additional charges to you. To make things simpler for you to identity or distinguish advertised or sponsored articles or links, you may consider all articles or links hosted on our site as a commercial article placement. We will not be responsible for any loss you may suffer as a result of any omission or inaccuracy on the website. .

Investing

Alternative data is an investor’s greatest ally against volatile markets

iStock 935500746 - Global Banking | Finance

194 - Global Banking | FinanceBy Ed Lavery, VP Investment Intelligence at Similarweb

The current economic situation is turbulent for investors, to say the least. From the threat of a looming recession, through to rising inflation, Russia’s invasion of Ukraine and the ongoing fallout from Brexit, current market conditions mean that it is becoming increasingly difficult for investors to predict trends and make safe, reliable, and profitable investment decisions.

During these unstable times, it is vital that investors have all the necessary information on prospective businesses and their performance to ensure that their investments are not wasted. To do this, investors would usually turn to tried and trusted sources – such as earnings reports, SEC filings, financial statements, management presentations or press releases – to gain insight into a business’s performance. While these do provide informative, reliable data on a company’s financial footing, relying on them as a main driver for investment decisions does have drawbacks.

The problem with relying on earnings reports, for example, is that they are only available periodically and when a company releases them. This means that, in between earnings announcements, investors can be left with little information on how a business is performing – relying on previous, out-of-date financial information for guidance, which is especially risky in current market conditions.

Taking an ‘alternative’ approach

However, we are starting to see a change in what information investors use to gauge where smart investments can be made, especially in the U.S. The collection of challenges previously outlined, as well as access to new technologies and solutions, has seen many state-side investors turn to alternative data to identify new opportunities.

The reason alternative data is being embraced by some is because it provides what traditional go-to sources (earning reports) cannot: access to real-time, quantifiable data that can be used to identify businesses and sectors they should be investing in.

For example, if investors can access the web-based data of a business, or multiple companies operating in a certain sector, they gain access to information such as website visits, purchase conversions, and page views, as well as compare their website’s current performance against previous time periods. Understanding which businesses and sectors are seeing increasing or decreasing web performance (traffic, conversion, engagement, search etc.) can then be used to identify the firms and industries they should be targeting.

It is not just web metrics and analytics where this principle applies – alternative data such as payment transactions, social media sentiment, and app usage are all providing vital information to inform future investments. The key benefit of all of these forms of alternative data is that they can be accessed whenever they are needed and are not reliant on businesses releasing performance information. This allows investors to make immediate decisions on whether or not they should be investing in them – something that goes a long way when many firms are facing heavy economic and market pressures.

Courage in times of adversity

While the U.S. has been at the forefront of harnessing alternative data, as seen with many of the major Wall Street banks, including JP Morgan and Citibank, regularly citing these data sources in their equity research reports, in the U.K., and Europe more broadly, the practice of using this information is still yet to be fully embraced, with many choosing to stick to the safety of traditional sources.

While there is understandable hesitancy about moving away from tried and trusted resources, this ambivalence from U.K. investors to utilise alternative data could see them being left behind. They could be missing out on huge investment opportunities that will be taken up by others, while at the same time increasing the chances of them making more risky decisions at a time when stability and confidence are vital.

There is no such thing as certainty in business, and never is that more true than when a cauldron of challenges like those we’re seeing today are put upon the U.K. and global economies. However, that doesn’t mean that investors should rest on their laurels and stick to what they know. Quite the opposite, now is the time for investors, particularly in the U.K. and Europe, to explore embracing new ways of working to drive better investment decisions. By harnessing alternative data, investors can ensure they have a broader range of vital information they need, when they need it and in real-time, to navigate the current and upcoming storm – and come out of it bigger, better and stronger.

Global Banking & Finance Review

 

Why waste money on news and opinions when you can access them for free?

Take advantage of our newsletter subscription and stay informed on the go!


By submitting this form, you are consenting to receive marketing emails from: Global Banking & Finance Review │ Banking │ Finance │ Technology. You can revoke your consent to receive emails at any time by using the SafeUnsubscribe® link, found at the bottom of every email. Emails are serviced by Constant Contact

Recent Post