Opening Cross: Non-Traditional Data? Just Shove Their Nose in It

There’s a saying that you can lead a horse to water, but you can’t force it to drink. It’s an old saying, but is just as used today. In fact, just last week Estimize chief executive Leigh Drogen used it to make a point about getting traders and investors to use new types of data. It’s not that investors aren’t thirsty for information: that’s what has led to the concept of Big Data—the need to delve deeper into larger volumes of data to gain an understanding of what’s really happening and ultimately gain an advantage.

Drogen’s solution was basically to take the horse and shove its nose in the water until it figures out how to drink. What he meant was that you can build all the smart content and analytics in the world and parade it in front of traders and investors, but if they don’t “get” it, they won’t use it. So while some clients already “get” how Estimize’s crowd-sourced consensus estimates can beat the traditional consensus of Wall Street analysts, others need a little help understanding how they can make money from it. So Estimize—which last week unveiled a new “Select Consensus” weighted estimate—is running the kind of testing that its clients would want to perform, and making the results available on its website to serve as suggestions of how users could exploit the data.

And it’s not just Estimize having to show people the way: when dealing with any new or non-traditional dataset or tool, vendors are finding that the burden is really on them to demonstrate its value much more so than in the past. When a potential client knows what it wants, and you have a product that achieves it, the pitch is easier than convincing a prospect of the value of something they haven’t yet thought of themselves.

In last week’s IMD, we detailed how Morningstar is adding commentary to its recently launched quantitative ratings, to provide additional context for investors. And this week, we describe how ETFGuide, which provides research on exchange-traded funds, sees potential to expand beyond the retail space and bring its research to institutional investors and traders via broker trading platforms, to bring more context to the burgeoning ETF market via platforms they are already familiar with. Meanwhile, fund flows data provider EPFR Global will release a set of new reports—collectively dubbed ChartBook—that provide commentary on fund flows trends between asset classes and geographies, to provide a series of ready-made investment ideas for subscribers, and also to point them in the direction of how they should be looking at the data to develop their own ideas.

Part of the issue is that end-users need a certain amount of guidance and hand-holding before they become comfortable with something completely new. But another contributing factor to this trend is the sheer amount and complexity of data that firms are now having to consume, analyze and find ways to incorporate into trading strategies. Whereas some firms say “Give me all your data, then go away and don’t look at what my rocket scientists are using it for,” others still want all the underlying data, but also want some tools—the data equivalents of picks and shovels, if you will—that help them mine valuable nuggets of information from what at first appears an impenetrable rock face of data.

Indeed, in an Open Platform in this week’s issue penned by Susan Strausberg, chief executive and co-founder of financial search engine 9W Search (and former CEO and co-founder of financial filings data provider Edgar Online), she describes the impact that increased data availability is having on the financial markets and their participants, resulting in a desperate search not for data, but for clarity, with the acknowledgement that while knowledge comes from information, making that knowledge valuable comes from being able to ascertain the right information from the deluge.

And to achieve that, you have to—for want of a more subtle phrase—just stick your nose in it.