The AI Book

CHAPTER 44Alternative Data and MetaQuants: Making the Most of Artificial Intelligence for Visionaries in Capital Markets

By Alejandra M.J. Litterio¹

¹Co-Founder and Chief Research Officer, Eye Capital Ltd

With the advent of artificial intelligence (AI) and its impact in capital markets, the analysis of traditional data – such as historical publicly reported revenues, fundamental, technical and economic indicators – seems to be no longer enough.

Talent, alternative data, the conception of hybrid forms such as the “quantamental”¹ and the “MetaQuant” have become key factors in a search for unexplored sources of alpha. How do we develop a comprehensible model with the most groundbreaking strategies based on machine learning (ML) and AI that allows investors to reap greater gains than other market participants?

In this chapter we rethink the core value proposition of alternative data and why a MetaQuant approach is a meaningful advantage to investors, enabling a deeper understanding and correlation of all the sources that could improve the appraisal of alternative data as a key engine for innovation in the “arms race” for an edge.

Historically, in almost any field, there is, apparently, a “holy grail”. In finance, it is the quest for novel sources of information as a way of gaining an advantage over competitors, called alternative data (alt-data). As alt-data continues to enter the mainstream, becoming an essential part of portfolio construction, investment professionals, hedge ...