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Apr 05, 2023

Consumer spending data to give ‘outsized informational edge’, finds investor survey

Research polls views of 100 investment professionals

Consumer spending patterns are predicted to give investors more of an edge than other types of alternative data over the coming years, according to a new survey.

A poll of 100 portfolio managers and buy-side analysts finds that 76 percent see consumer spending data as providing ‘an outsized informational edge in the near future’.

Neil Chapman of Exabel
Neil Chapman, CEO of Exabel

The next-most popular option is web, mobile and app usage (cited by 65 percent of respondents), employment and people moves (58 percent) and social listening (41 percent), explains the report from data firm Exabel.

The research also asks which types of alternative data categories will see a dramatic increase in use over the next three years. The most popular option is once again consumer spending data (cited by 52 percent), followed by employment data (44 percent) and web-scraped data, such as web searches and click-through rates, at 37 percent.

Data hungry

Investors have long relied on alternative data, which refers to datasets beyond traditional financial sources such as company results and broker notes, to support the investment process.

But the use of alternative data has ballooned in the last two decades as increasing amounts of data have become available, along with powerful computers to process the information.

The emergence of sophisticated chatbots, like OpenAI’s ChatGPT and Google’s Bard, is set to offer investors further ways to source and analyze non-traditional datasets.

On a recent IR Magazine Webinar, panelists discussed how generative AI tools like ChatGPT could ultimately take over from search engines as the main way people search for information on companies.

Ubiquitous use

The Exabel survey reports that nearly all respondents (96 percent) are already incorporating alternative data into their investment decisions, while 90 percent expect the use of alternative data to rise further over the next three years.

The main challenges of using alternative data, according to the research, are combining data from different sources (cited by 71 percent of respondents), processing raw data into a usable format (53 percent) and comparing different datasets that are similar (49 percent).

‘The alternative data market is making huge progress and the insights and trends it can show are becoming more important for investment professionals,’ says Neil Chapman, CEO of Exabel, in a statement.

‘Challenges remain in capitalizing on the full potential of alternative data, but many of these are fading as technology evolves and the market matures.’