The Use and Usefulness of Big Data in Finance: Evidence from Financial Analysts

Alternative data have become a new source of information for investors. This paper examines how this development is reshaping the role of sell-side analysts. Employing textual analysis of analysts’ written reports, we show that analysts themselves have begun to adopt alternative data in their analyses. Furthermore, we find that when analysts report having drawn from alternative data, they generate more accurate earnings forecasts and their brokerages subsequently receive higher amounts in trading commissions from investors, suggesting that investors value the adoption of alternative data by analysts.

Keywords: Big Data, Alternative Data, Sell-Side Analysts, Investors

JEL Classification: G12, G14, G17, G24

Suggested Citation: Suggested Citation

Chi, Feng and Hwang, Byoung-Hyoun and Zheng, Yaping, The Use and Usefulness of Big Data in Finance: Evidence from Financial Analysts (December 29, 2023). Nanyang Business School Research Paper No. 22-01, Available at SSRN: https://ssrn.com/abstract=4035037 or http://dx.doi.org/10.2139/ssrn.4035037