Alternative Data vs. Traditional Data: What's the Difference?
Posted on June 12, 2022 By John In Uncategorized
When it comes to data, there are two main types: alternative data and traditional data. Alternative data is any type of data that falls outside of the traditional sources like financial reports and surveys. This can include data from social media, satellite imagery, internet search trends, and more. Traditional data is the more common type of data, which includes information from financial reports, surveys, and other similar sources. So which one is better? That's a tough question to answer. Each type of data has its own strengths and weaknesses. In this blog post, we will explore the differences between alternative and traditional data, and discuss when each type is most useful.
What is alternative data?
What are some examples of alternative data?
What is traditional data?
Difference between alternative data and traditional data?
Risks of using alternative data
When to use alternative data
Alternative data is defined as any information that can be used to make investment decisions but falls outside of the more traditional data sets, such as price and volume.
Alternative data can be used to get a more complete picture of a company or sector and can help make better investment decisions.
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One example is social media sentiment analysis. This type of alternative data looks at how people are feeling about a company or sector on social media platforms and can be used to make predictions about future stock prices.
Another example of alternative data is satellite imagery. This type of data can be used to track things like foot traffic at retail locations, or the number of cars in a parking lot.
Traditional data is the more commonly used data sets, such as price and volume. Traditional data also includes information from financial reports, surveys, and other similar sources.
Well, alternative data is often more timely and can provide a more complete picture of a company or sector. Traditional data is usually more accurate but can be slower to update.
Alternative data can be less reliable than traditional data and can be more difficult to interpret.
Another risk is that alternative data sources can be biased. For example, social media sentiment analysis can be influenced by the people who are most active on social media, which may not be a representative sample of the population.
Alternative data can be most useful when traditional data sources are not available, or when you want a more complete picture of a company or sector.
For example, if you're trying to track the foot traffic at a retail location, satellite imagery can be more helpful than traditional data sources like surveys.
So there you have it. A brief overview of the differences between alternative and traditional data. As you can see, each type of data has its own strengths and weaknesses. When making investment decisions, it's important to use both types of data to get the most accurate picture possible. Thanks for reading.
Do you have any questions about alternative or traditional data? Leave a comment below and let us know.
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John Ng
John recently retired after working as a director of finance for a multinational manufacturing company. He's a contributor to our blog. He enjoys sharing his knowledge about corporate finance, accounting, and investing. He holds an MBA from NUS. Subscribe to our newsletter to stay in touch.
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