Business processes

Businesses and public entities produce and collect many valuable sources of alternative data. Data that results from business processes has often more structure than that generated by individuals. It is very effective as a leading indicator for activity that is otherwise available at a much lower frequency.

Data generated by business processes include:

  • Payment card transaction data made available by processors and financial institutions
  • Company exhaust data produced by ordinary digitized activity or record-keeping, such as banking records, cashier scanner data, or supply chain orders
  • Trade flow and market microstructure data (such as L-2 and L-3 order book data, illustrated in Chapter 2Market and Fundamental Data)
  • Company payments monitored by credit rating agencies or financial institutions to assess liquidity and creditworthiness

Credit card transactions and company exhaust data, such as point-of-sale data, are among the most reliable and predictive datasets. Credit card data is available with around ten years of history and, at different lags, almost up to real time, while corporate earnings are reported quarterly with a 2.5-week lag. The time horizon and reporting lag for company exhaust data varies widely depending on the source. Market microstructure datasets have over 15 years of history compared to sell-side flow data, which typically has fewer than five years of consistent history.

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