The use of data in financial markets has become increasingly important, with stock markets, banks, investment firms, and practically every single financial institution now using it as foundation for their work.
According to research from S&P they are not resting on their laurels either, with a staggering 80% of asset managers planning to increase their investment in big data in the next 12 months.
The trend has become so important to the future of the industry that the use of big data, automation, and artificial intelligence is going to be included in the Chartered Financial Analyst(CFA) Exams moving forward. This isn’t simply a case of throwing something in that’s new and exciting either. The purpose of the exam is to make sure that new financial analysts know everything they are expected to know. It is indicative of its increased importance that a knowledge of these areas is no longer a ‘nice to have’ but have now become an essential part of how financial companies operate.
This move is not a surprise for anybody working within the industries and neither should it be for anybody with a base understanding of how either modern data techniques operate or have a knowledge of market trends. Data-driven companies or those who utilize them have become essential to increased profits in these areas, with companies like Dataminr using data scraped from Twitter to predict the huge issues that Volkswagen had around their emissions several days before it was announced and the share price dropped.
The use of data from a huge variety of areas and having the ability to combine them to come to actionable insights is essential to financial success. For instance, CargoMetrics, who traditionally use satellite data to give an indicator of global trade have launched their own hedge fund that utilises this kind of data to predict market fluctuations. Companies have even been known to predict share prices for retailers from the number of lorries leaving distribution centres and the number of cars parked outside their shops.
Where previously a financial analyst would be somebody who would look at past performance through a variety of metrics and spreadsheets, they are now investigating companies through a wide variety of data, from social media through to satellite imagery.
Companies who can exploit this new information the best or who can find new metrics to indicate company performance are the ones who are going to do better than their competitors. It is therefore little surprise to see that it has become so central that it is now a pre-requisite for working in the industry.