Hands-On Machine Learning for Algorithmic Trading

ML and alternative data

Hedge funds have long looked for alpha through informational advantage and the ability to uncover new uncorrelated signals. Historically, this included things such as proprietary surveys of shoppers, or voters ahead of elections or referendums. Occasionally, the use of company insiders, doctors, and expert networks to expand knowledge of industry trends or companies crosses legal lines: a series of prosecutions of traders, portfolio managers, and analysts for using insider information after 2010 has shaken the industry.

In contrast, the informational advantage from exploiting conventional and alternative data sources using ML is not related to expert and industry networks or access to corporate management, but rather ...