On the Capital Market Consequences of Alternative Data: Evidence from Outer Space

Abstract

We study the emergence of satellite imagery of parking lot traffic across major U.S. retailers as a source of alternative data in capital markets. While satellite imagery signals embed timely information for earnings announcements, stock prices do not incorporate this information prior to the public disclosure of retailer performance. This creates opportunities for sophisticated investors to formulate trading strategies at the expense of individual investors, who tend to be on the other side of the trade. The evidence shows that unequal access to alternative data can increase information asymmetry between sophisticated investors and individual investors without necessarily enhancing price discovery.

Keywords: Alternative Data; Satellite Imagery; Price Discovery; Information Asymmetry

JEL Classification: G12, G14, G23