Work

Equilibrium Data Mining and Data Abundance

Year: 2024

Type: article

Abstract: ABSTRACT We study theoretically how the proliferation of new data (“data abundance”) affects the allocation of capital between quantitative and nonquantitative asset managers (“data miners” and “experts”), their performance, and price informativeness. Data miners search for predictors of asset payoffs and select those with a sufficiently high precision. Data abundance raises the precision of the best predictors, but it can induce data miners to search less intensively for high‐precision signals. In this case, their performance becomes more dispersed and they receive less capital. Nevertheless, data abundance always raises price informativeness and can therefore reduce asset managers' average performance.

Source: The Journal of Finance

DOI: 10.1111/jofi.13397

Authors: JÉRÔME DUGAST, THIERRY FOUCAULT

Institution: Groupement de Recherche et d'Études en Gestion d’HEC

Language: English

Topic: Financial Markets and Investment Strategies

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: hybrid

Estimated APC paid: $4,220

Funders: European Commission, Universität Wien, H2020 European Research Council