Investment Decisions: Creating A Competitive Edge Using Big Data & Machine Intelligence

Michael Douglas as Gordon Gekko in the movie "Wall Street"
Source: Bloomberg
Source: Bloomberg
Challenges in generating higher returns. Source: Quinlan & Associates
  • Commodization: access to the same information and similar analysis and modeling methodology give similar results, which prevents differentiation.
  • Research is very labor intensive, requires talents and specialization and hardly scalable (more stocks to follow means more people).

How to create value-generating signals?

As Michael Douglas puts it as Gordon Gekko in Oliver Stone’s movie Wall Street: “The most valuable commodity I know of is information”. Creating value-generating signals involve:

  1. Data source diversification with alternative datasets
  2. Investments decision-making process mapping

1. Robotics via intelligent workflow automation

Beyond Automation

2. Data source diversification with alternative datasets

As discussed above, content and speed can help create Information asymmetry. Alternative data sources such as satellite images showing ports activity by tracking container ships coming in and out; drones monitoring warehouses and factories to count the number of trucks coming in and out are key alternate indicators that can help predict variations of a company’s future cashflows.

Alternate data sources categories. Source: Eagle Alpha

3. Investments decision-making process mapping

As I mentionned in a previous article: our boldest, brightest and poorest decisions are based on logic and guts.

Decision Value Chain

Closing Remarks

Differentiation can achieved via better Value Capture or increased Value Creation, or both: Value capture can be achieved cost reduction via intelligent automation while Value creation can be achieved by differentiation via information asymmetry and superior decision making with high intimacy with capital markets.

Data powered Organization

Tech Executive, Speaker, Writer, Adviser, Dreamer, Long Distance Runner, Pastry Chef, Pianist.