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. We find that while measures of parking lot traffic from outer space embed timely value-relevant information, such information is not incorporated into stock prices prior to the public disclosure of retailer performance for the quarter. This creates opportunities for sophisticated investors, who can afford to incur the costs of acquiring and processing satellite imagery data, to formulate profitable trading strategies at the expense of individual investors, who tend to be on the other side of the trade. Our evidence suggests that unequal access to alternative data increases information asymmetry among market participants without necessarily facilitating stock price discovery.

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

JEL Classification: G12, G14, G23