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Research & the Role of Big Data
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IvySchmerken
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IvySchmerken,
User Rank: Author
8/6/2014 | 12:08:42 PM
Re: Research a High Touch Market
it's true that some buy side traders have used sales traders for their executions because they need to pay a research bill with a particular brokerage firm.

I think some people will prefer to deal with a human analyst and others will gravitate toward automated fundamental research platforms.  Both models could co-exist.  With the volume of earnings data, news, blogs and social media to digest, I would  automated models will gain traction. I don't necessarily think the automated research models will fail.
plashmet
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plashmet,
User Rank: Apprentice
8/5/2014 | 3:53:22 PM
Research a High Touch Market
I've been reading that electronic trading in equities has stagnated over the years or has even decline recently because there is still value in high-touch trades, speaking on the phone with a sales trader.  Could that be the same with research and automated research doesn't take off?
IvySchmerken
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IvySchmerken,
User Rank: Author
8/5/2014 | 12:25:13 PM
Is research a "speed and scale" game?
Automated fundamental research is turning research into "speed and scale" game, which may work for quants that can feed the numbers into their models.  Granted it can help brokerage firms make due with fewer analysts and replace them with analytical software ane more efficient workflows. I don't see this replacing the connection between the buy side and a security analyst. The research relationship also provides access to corporate management at public companies and conferences, which automated fundamental analysis doesn't address.
IvySchmerken
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IvySchmerken,
User Rank: Author
8/5/2014 | 11:23:18 AM
Re: What's Holding Brokerages Back?
What is holding brokers back from investing in big data tools for research analysts?

It could be a generational issue. Analysts that have 20 to 30 years in the business, may not be comfortable using big data technology. I tend to think if you're paying a star analyst a seven figure salary for the judgement would a big data tool  and workflow automation make sense? Brokers can cover more stocks and ETFs with fundamental analysis but that's not a replacement for a conversation. Institutional customers want to talk to a human being... that is often why they value the research relationship. So even if the analysts had big data technology to cover more companies, portfolio managers are really paying for the relationshpis and "corporate access" to management of the public issuers.
Byurcan
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Byurcan,
User Rank: Author
8/5/2014 | 9:26:09 AM
Re: Too good to sell?
Interesting point, no one does want to give away the "secret sauce" for free.
Becca L
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Becca L,
User Rank: Author
8/4/2014 | 11:05:28 AM
Too good to sell?
One of the theories shared by Indy Sarker is that if research shops produce stellar big data-type research, they aren't going to sell it, they will choose to leverage it themselves. Naturally, if a firm comes up with a model that is 95% accurate, they're going to keep their secret sauce close and start their own fund.
NJ_trader
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NJ_trader,
User Rank: Moderator
8/4/2014 | 10:16:06 AM
What's Holding Brokerages Back?
Outside of the tendency to keep doing business the way it has always been done (and the 'star' quality of the analyst), what is holding the brokerages back from investing in big data technology to improve their research processes? Research has always been a big value add for brokers.


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