"Does Alternative Data Improve Financial Forecasting? The Horizon Effect"
|Date||4 March 2021|
We analyse the effect of alternative data on the informativeness of financial forecasts. Our starting hypothesis is that the emergence of alternative data reduces the cost of obtaining information about firms' short-term cash-flows more than their long-term cash-flows. If correct and forecasting short-term and long-term cash-flows are distinct tasks, analysts will reduce effort to process long-term inforamtion when alternative data becomes available. Alternative data thus makes long-term forecasts less informative, while increasing the informativeness of short-term forecasts. We confirm this prediction using variations in analysts' exposure to social media data and a new measure of forecast informativeness at various horizons.
*Co-authored with Olivier Dessaint (INSEAD) and Thierry Foucoult (HEC Paris)
This seminar will be held via ZOOM. Please send an email to the secretariat of Finance Group if you want to attend this seminar.