Alternative Data, Text Analytics, and Sentiment Analysis in Trading and Investing - Alternative Data Sources

In the Finance Industry, Alternative Data is used to give investors an information advantage. Quantitative Hedge Funds have used trading models based on Alternative Data for many years. The most common Alternative Data signal used in quantitative trading and quantitative investing is based on text data from the Internet, and the trading models can broadly be defined as algorithmic trading models and as statistical arbitrage models. It has been suggested that text analysis is the key to success for the most successful money manager of all times. The trading model can use text data and sentiment data as the only, or as one of several, inputs, and it can be the main strategy, or one of several strategies, in a hedge fund. Some traditional funds use text-based signals to build the models they use as an overlay to other strategies and as a risk indicator for tactical asset allocation.