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The relevancy of Big Data for investors

security data 2by Yolanda Smit, Regional Director at PBT Group
According to a BBC report, computer company IBM stated that 2.5 billion gigabytes of data was generated every day in 2012. Given its importance on business strategy, data usage has not abated in the intervening years. Considering this, how can the investment sector benefit from this data-rich environment?
The investment space is probably one of the most analytically mature industries in the world today. Key decisions are based on any number of quantifiable indicators that can range from headline earnings per share and price-earnings ratios, all the way through to market time-series forecasting and neural networks.
It therefore stands to reason that people should already understand how beneficial using all available data sources should be to make important investment decisions. In reality, however, a significant percentage of data in these indicators are constrained to historical corporate and market information only. It does not account for fresh data sources fuelled by conversations online across social networking platforms or multiple varieties of data made available through myriads of new “smart device” applications.
Identifying new sources of data
Big Data in the digital world is far richer than traditional historical data sources. Big Data drives new insights that can be derived from the masses of information that come from seemingly irrelevant information domains.
Take public sentiment as an example. People share news and individual viewpoints on companies, economies, political parties, and other areas of interest with one another on any number of social networking sites. And while cynics might argue that much of this information contributes to data noise, the reality is that it could provide strong leading indicators of market behaviour and sentiment much quicker than could historically be detected. Monitoring social sentiment and responses to a variety of events or triggers can also provide more insight into true market influencers.
Similarly, the Internet of Things (IoT) and the continued rise of connected devices are ushering in different opportunities for insights when one have the capability to analyse this data effectively. Certainly, the connected fridge ordering milk when a person runs out might not sound influential on investment choice, however, using personal health devices linked to medical data could have a massive impact on insurance premium strategies. It might lead to the early diagnoses of a serious illness or even provide an early warning around an imminent heart attack, meaning that action can be taken to prevent this. The impact this could have on insurance is profound. Some industry leaders have already leveraged these insights to drill their pricing strategies down to almost an individual personalised level showing significant improvement on profitability per insured member.
Data, data, data and more data
Placing issues of personal privacy aside, the push towards IoT is gaining momentum locally. It is even extending beyond telemetry in transport and logistics and encompassing the likes of health and fitness, retail, and manufacturing.
These devices are creating new data points with information streaming into corporate networks. For investors, this should signify a different approach to their thinking when they evaluate possible candidate entities to invest in. The mere fact that a candidate is strategically investing into things such as Big Data analytics and data science capabilities should already provide potential investors with an indicator of future growth potential.
Data has been labelled by many as the ‘new oil’. For anybody active in the investment space, this should be a clear sign that those organisations who actively embrace the learnings that Big Data provide today, should be ones to watch in a digitally-led world. For those investment organisations not yet placing a focus on data, time and effort should be spent on understanding the benefits Big Data and Analytics offers in this space, to not only capitalise on these benefits, but to also avoid not falling behind .
Yolanda Smit is Regional Director at PBT Group
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