Equilibrium Data Mining and Data Abundance

62 Pages Posted: 27 Jan 2021 Last revised: 3 Jan 2024

See all articles by Jerome Dugast

Jerome Dugast

Université Paris-Dauphine, PSL Research University; Université Paris Dauphine - Department of Finance

Thierry Foucault

HEC Paris - Finance Department

Date Written: November 2, 2023

Abstract

We study theoretically how the proliferation of new data (``data abundance") affects the allocation of capital between quantitative and non-quantitative asset managers (``data miners" and ``experts"), their performance, and price informativeness. Data miners search for predictors of asset payoffs and select those with a sufficiently high precision. Data abundance raises the precision of the best predictors but it can induce data miners to search less intensively for high precision signals. In this case, their performance becomes more dispersed, and they receive less capital. Nevertheless, data abundance always raises price informativeness and can therefore reduce asset managers' average performance.

Keywords: Big Data, Active Asset Management, Data Mining, Price Informativeness.

Suggested Citation

Dugast, Jerome and Foucault, Thierry, Equilibrium Data Mining and Data Abundance (November 2, 2023). HEC Paris Research Paper No. FIN-2020-1393, Université Paris-Dauphine Research Paper No. 3710495, Available at SSRN: https://ssrn.com/abstract= or http://dx.doi.org/10.2139/ssrn.3710495

Jerome Dugast (Contact Author)

Université Paris-Dauphine, PSL Research University ( email )

Place du Maréchal de Lattre de Tassigny
Paris, 75016
France

Université Paris Dauphine - Department of Finance ( email )

Place du Maréchal de Lattre de Tassigny
Paris Cedex 16, 75775
France
+33 1 44 05 40 41 (Phone)

HOME PAGE: http://https://sites.google.com/view/jeromedugast/home

Thierry Foucault

HEC Paris - Finance Department ( email )

1 rue de la Liberation
Jouy-en-Josas Cedex, 78351
France
(33)139679569 (Phone)
(33)139677085 (Fax)

HOME PAGE: http://thierryfoucault.com/

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