Skill Acquisition and Data Sales
62 Pages Posted: 16 Nov 2016 Last revised: 1 Feb 2020
Date Written: January 31, 2020
We develop a data-sales model to study the implications of alternative data for financial markets. In our setting, investors acquire skills to interpret purchased data and the data seller controls data clarity. Acquiring relevant skills for interpreting the purchased data involves considerable uncertainty, which captures the "gold rush" feature of mining alternative data. This feature implies that price informativeness can increase with skill- acquisition costs and decrease with the average investor skill level. Our analysis sheds light on empirical regularities, such as the time trend of price informativeness and the relation between return volatility and institutional ownership.
Keywords: Data sales, skill acquisition, alternative data, asset prices
JEL Classification: D82, G12, G14
Suggested Citation: Suggested Citation