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

Abstract

We use the introduction of satellite coverage of major retailers to study the capital market implications of unequal access to alternative data. We find that satellite data allowed sophisticated investors to formulate profitable strategies by targeting the quarterly reports of retailers with bad news. Using a difference-in-differences design, we find that the release of satellite data led to more informed short selling activity, less informed individual buying activity, and lower stock liquidity prior to the quarterly reports of retailers with satellite coverage. Overall, our paper provides evidence that unequal access to alternative data can increase information asymmetry among market participants.

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

JEL Classification: G12, G14, G23