From Eagle Alpha
This is only the beginning for Wall Street leveraging the web. The best advances are yet to come and it will be innovative buyside firms who will be leveraging the web in the most interesting ways. Some use cases:
1. Analysis of Foursquare Data to Predict Sales
Analyzing data from location-based social networks, like Foursquare and their newly launched Swarm app, which allow users to “check-in” at venues could provide very valuable insights.
By building geo-fences around the stores it would be possible to chart trends regarding the number of people walking into every Starbucks or Pret-a-Manger in Manhattan. Various metrics could be measured over time; check-ins recorded each day, the most frequent visitors, and even gender break downs. Check-in data related to a company’s stores as well as their competitors would offer unique insights and opportunities to forecast sales and performance.
What is even more exciting is that Foursquare have plans to make this data even richer- with newly launched Swarm app their goal is to introduce automatic check-ins. If checking-in is made passive this will even further increase the value of this data.
2. Create quantitative strategies based on the top influencers on Twitter
Information is the lifeblood of high-frequency algorithmic trading and quantitative strategies. Rather than plugging the entire Twitter firehose into their systems, analysing the top influencers on Twitter would yield better results. Instead of analysing content from the 974,000,000 twitter accounts, funds could focus on the top 10,000 identified influencers. Since November 2012 Eagle Alpha has leveraged algorithms and research analysts to identify the top 10,000 stock market influencers on Twitter. From July 2014 this information set is being made available to quant funds.
3. Monitoring geo-tagged tweets
Roughly 20 percent of tweets show users location, either directly embedded in a geo-tagged tweet or from users inadvertently revealing their location. In theory therefore it is possible to monitor information coming from a specific location to search for crucial insights directly at source.
Possible applications of this would be to listen to what is being said at a specific Exxon or BP oil rig or Facebook HQ. These applications would provide great insight into what employees are saying.
4. Analysis of Sina Weibo firehose data
Analysing data from Sina Weibo, the dominant Chinese social media channel with 500 million registered users and 100m messages posted daily, could offer a unique opportunity for the buyside to understand the demographics and interests of the world’s second biggest consumer market. Gnip noted that “the social data available on Chinese platforms is a lot richer. You can get gender, location, and users are willing to share that information. Weibo is even able to provide education level”. Access to Sina Weibo data and firehose search will provide investors with invaluable insights of a market with more than 1.6 billion consumers.
Leveraging blog content is more difficult than information from other social media feeds given how dispersed blogs are online. There are hundreds of quality bloggers worldwide sharing their expertise and providing great insights on macro topics but it is difficult to find and monitor the most important sources.
In July 2012 Eagle Alpha will launch a new feature that will leverage our technologies and research analysts to identify the best blog content across the entire web, organise it into them or regions and rate it. Contact us if you would like a free trial.
Text is not the only interesting content on the web to be analysed. Images provide a rich and valuable source of information. Millions of images can be processed and analysed for information of interest.
It is feasible that using a combination of technologies; such as facial recognition software and geo-location data, that CEOs movements could be tracked through photos posted of them through social media channels.
There is vast amounts of information available online relating to pharmaceuticals which could be leveraged for investment decisions. One website in particular aggregates data from US GP prescriptions for all drugs. From the data it generates real-time market shares for all drugs across the US and tracks how market shares have evolved over time.
In the treatment of type 2 diabetes we see that Januvia is the most common drug prescribed, but we see highlighted the rapid penetration of Invokana since its launch. This information is particularly interesting therefore for analysts monitoring drug trials or patent expirations.
Another website scrapes patients’ forms for drugs. Drugs used for the same purpose are rated based on the data and information on the patients’ top concerns is given.
8. Pre-IPO report
Given that the web provides unique insights on companies, analyzing this information in the lead-up period to an IPO can reveal interesting information, particularly given the lack of information available on companies pre-IPO. For example, investors are be interested in reports that leverages online information ahead of the highly anticipated Alibaba Group IPO. In early July Eagle Alpha will publish a 50 page pre-IPO report on Alibaba Group. Contact us if you would like a copy.
9. Custom Research
A new company that is about to launch will specialize in custom web research. Using a wide range of licensed tools and software the web can be leveraged to find insightful information and analysis. Research can be conducted on any topic; from translation of the best commentary on Sino Weibo in H1 2014 regarding commodities, to analysis of all employee commentary in H1 2014 regarding Netflix, or even female sentiment in Manhattan during the two weeks following the launch of the next iPhone. Contact our CEO if you would like an introduction to the company that will do custom research. His email is email@example.com
As discussed, key economic announcements like housing and car sales can already be reasonably anticipated from Google search analysis. By choosing other appropriate economic drivers to analyse,
greater economic, regional, national, and industry segmentations should be possible. This information could be used to generate more precise real-time measures of macroeconomics (growth, inflation, trade) and industry, or even to develop aggregate international economic and financial statistics. This could have a huge impact on global capital markets, risk and volatility. Bond markets may be less affected by infrequent information releases such as quarterly economic reports with a steady stream of higher quality inputs from data. Economic releases such as GDP, inflation and industrial production may become more accurate and less surprising thanks to advance signals from data methods.
This article is an extract from a 30-page White Paper which can be downloaded at http://www.eaglealpha.com/whitepaper