The Book of Alternative Data

CHAPTER 20Alternative Data in Private Markets

20.1. INTRODUCTION

A lot of the focus on alternative data has been on its use within public markets. If a firm is publicly traded, it is required to disclose a significant amount of information, such as in the form of earning releases and annual reports. For macro traded assets, we also have many data releases from national statistical agencies. As we have already stated numerous times, alternative data can help us fill the gaps and it can give us an idea of the state of a firm or an entire economy on a much higher-frequency basis, such as daily and weekly, rather than quarterly. Alternative data can also help reduce the lag associated with “official” data. However, in both these instances, we often have an official yardstick of what “ground truth” is. We know what the earnings of a company will be at predefined intervals. We know that unemployment data will be released monthly and so on.

When it comes to understanding private companies, there is less data for us to establish the “ground truth.” The level of disclosure required for private firms is much less than that required for public firms. In some countries, like the UK, we may at least have annual accounts for companies available from a public source such as Companies House. However, in many other countries, there might not be this level of granularity concerning the financials of private companies. At a macro level, the validity of official economic data is not consistent, ...