The Perils of Working with Big Data and a SMALL Framework You Can Use to Avoid Them

35 Pages Posted: 28 Dec 2020

See all articles by Scott A. Brave

Scott A. Brave

Federal Reserve Bank of Chicago

R. Andrew Butters

Indiana University

Michael Fogarty

Federal Reserve Bank of Chicago

Multiple version iconThere are 2 versions of this paper

Date Written: December 22, 2020

Abstract

The use of “Big Data” to explain fluctuations in the broader economy or guide the business decisions of a firm is now so commonplace that in some instances it has even begun to rival more traditional government statistics and business analytics. Big data sources can very often provide advantages when compared to these more traditional data sources, but with these advantages also comes the potential for pitfalls. We lay out a framework called SMALL that we have developed in order to help interested parties as they navigate the big data minefield. Based on a set of five questions, the SMALL framework should help users of big data spot concerns in their own work and that of others who rely on such data to draw conclusions with actionable public policy or business implications. To demonstrate, we provide several case studies that show a healthy dose of skepticism can be warranted when working with and interpreting these new big data sources.

Keywords: big data, economic statistics, business analytics, forecasting

JEL Classification: C53, C55, C80, C81

Suggested Citation

Brave, Scott A. and Butters, R. and Fogarty, Michael, The Perils of Working with Big Data and a SMALL Framework You Can Use to Avoid Them (December 22, 2020). FRB of Chicago Working Paper No. 2020-35, Available at SSRN: https://ssrn.com/abstract=3753859

Scott A. Brave (Contact Author)

Federal Reserve Bank of Chicago ( email )

230 South LaSalle Street
Chicago, IL 60604
United States

R. Butters

Indiana University ( email )

1309 E. Tenth St.
Bloomington, IN 47405
United States

HOME PAGE: http://https://kelley.iu.edu/BEPP/faculty/page14113.cfm?ID=46947

Michael Fogarty

Federal Reserve Bank of Chicago ( email )

230 South LaSalle Street
Chicago, IL 60604
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
14
Abstract Views
113
PlumX Metrics