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Selling Data to Hedge Funds (2017)

alternativedata.org

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Re: Selling Data to Hedge Funds (2017)

#11

Post by elevenoh »

logicslave wrote: post #9

Honestly if you have a predictive data set, most likely it is more profitable to use it to invest yourself than it is to sell it. Its like a successful startup raising VC funding, the good ones dont need the investors, the bad ones do. Source is I used to work in this space. Clearly there are operational difficulties to investing and serious domain knowledge but if you have data with alpha, its worth insane amounts o…

True.

I'd ask: "If this data is truly useful in a financial market context, why are you selling it instead investing with it yourself? What data are you collecting that you're not* selling?"

Re: Selling Data to Hedge Funds (2017)

#12

Post by fractionalhare »

logicslave wrote: post #9

Honestly if you have a predictive data set, most likely it is more profitable to use it to invest yourself than it is to sell it. Its like a successful startup raising VC funding, the good ones dont need the investors, the bad ones do. Source is I used to work in this space. Clearly there are operational difficulties to investing and serious domain knowledge but if you have data with alpha, its worth insane amounts o…

I disagree. Sell-side research using so-called alternative data is a different skillset from trading and buy-side research. Some datasets comprise sufficient alpha in of themselves to trade on, some datasets have some edge (i.e. are not yet priced in) but require more sophisticated analysis. Good data is necessary but insufficient for developing viable trading strategies.

Source: Also used to work in this space. Still do, but not on the sell-side anymore. I wouldn't give trading capital to someone if their entire pitch was just possession of exclusive, useful data.

Re: Selling Data to Hedge Funds (2017)

#13

Post by fractionalhare »

r_singh wrote: post #8
threedots wrote: post #4

I run a business in this space. Realistically your chances of having data that is useful to a HF (of any kind) is pretty low so I wouldn't bank on it as a revenue source unless you have a strong reason to believe (1) your data is predictive of something an investor cares about and (2) isn't already covered by other data.

Could I send you a sample? I’m curious about certain data I’m scraping for a project.

If you shoot me an email I can tell you very quickly if it's viable, and direct you to specific people at firms who would buy it. I probably don't need a sample if you give an honest description of it.

Re: Selling Data to Hedge Funds (2017)

#14

Post by fractionalhare »

threedots wrote: post #4

I run a business in this space. Realistically your chances of having data that is useful to a HF (of any kind) is pretty low so I wouldn't bank on it as a revenue source unless you have a strong reason to believe (1) your data is predictive of something an investor cares about and (2) isn't already covered by other data.

There are also ways to reliably find and curate this data for trading firms and asset managers. But that usually requires a somewhat uncommon blend of skills; like statistics, web scraping, reverse engineering, or some domain expertise that gives you an edge in (legally) finding and using nonpublic data. Scrappiness also helps a lot.

Re: Selling Data to Hedge Funds (2017)

#15

Post by fractionalhare »

elevenoh wrote: post #11
logicslave wrote: post #9

Honestly if you have a predictive data set, most likely it is more profitable to use it to invest yourself than it is to sell it. Its like a successful startup raising VC funding, the good ones dont need the investors, the bad ones do. Source is I used to work in this space. Clearly there are operational difficulties to investing and serious domain knowledge but if you have data with alpha, its worth insane amounts o…

True. I'd ask: "If this data is truly useful in a financial market context, why are you selling it instead investing with it yourself? What data are you collecting that you're not* selling?"

This is a good heuristic for the sale of trading strategies. If someone has a viable trading strategy, they should be raising capital or joining a prop shop instead of selling it.

But it's not maximally rational to trade on data instead of selling it if you don't have any experience trading.

Re: Selling Data to Hedge Funds (2017)

#16

Post by whatok »

fractionalhare wrote: post #15
elevenoh wrote: post #11

Earlier quoted context omitted.

True. I'd ask: "If this data is truly useful in a financial market context, why are you selling it instead investing with it yourself? What data are you collecting that you're not* selling?"

This is a good heuristic for the sale of trading strategies. If someone has a viable trading strategy, they should be raising capital or joining a prop shop instead of selling it. But it's not maximally rational to trade on data instead of selling it if you don't have any experience trading.

And even if you're somehow able to figure out a trading strategy on this with no expertise, there are extremely few data sources that are actually proprietary so alpha decay is a very real thing.

Re: Selling Data to Hedge Funds (2017)

#17

Post by fractionalhare »

paulgb wrote: post #2

The article mentions having a long history of data, but I want to stress a corollary of this: if you think you might eventually want to sell data, either put your data in an append-only data format now so that history is preserved, or at least take regular snapshots. Otherwise, any time you update the data in place, you make it impossible to reconstruct what the data "looked like at the time" for a backtest.

Yep. You typically need to incubate your data for several quarters to demonstrate a real correlation. And you have to balance how you prove this against the fact that some firms will try to reproduce the data collection internally once they learn how you get it.

Re: Selling Data to Hedge Funds (2017)

#18

Post by dhairya »

threedots wrote: post #4

I run a business in this space. Realistically your chances of having data that is useful to a HF (of any kind) is pretty low so I wouldn't bank on it as a revenue source unless you have a strong reason to believe (1) your data is predictive of something an investor cares about and (2) isn't already covered by other data.

Out of curiosity what resolution and time scale is useful. Is it fair to assume the most hedge funds are relatively good at tracking recent information and the value is in older archives that's hard to collect?

Also are event streams and large connect event graphs like Forge.AI what sells actually useful?

Curious as my phd research potentially has applications for information extraction and event linking. But not entirely sure if those applications are actually valuable

Re: Selling Data to Hedge Funds (2017)

#19

Post by conformist »

paulgb wrote: post #2

The article mentions having a long history of data, but I want to stress a corollary of this: if you think you might eventually want to sell data, either put your data in an append-only data format now so that history is preserved, or at least take regular snapshots. Otherwise, any time you update the data in place, you make it impossible to reconstruct what the data "looked like at the time" for a backtest.

Absolutely. Ideally, you'd want both, "append only" and a vintage of the corrected historical data at every point in time. And good metadata.

Re: Selling Data to Hedge Funds (2017)

#20

Post by ed25519FUUU »

threedots wrote: post #4

I run a business in this space. Realistically your chances of having data that is useful to a HF (of any kind) is pretty low so I wouldn't bank on it as a revenue source unless you have a strong reason to believe (1) your data is predictive of something an investor cares about and (2) isn't already covered by other data.

I’m curious the types of data that are useful, what goes into them, and what the curators of that data might make for them.
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