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On the Capital Market Consequences of Big Data: Evidence from Outer Space

Published online by Cambridge University Press:  05 April 2024

Zsolt Katona ,
Marcus O. Painter ,
Panos N. Patatoukas Open the ORCID record for Panos N. Patatoukas [Opens in a new window]  and
Jean Zeng
Zsolt Katona
Affiliation:
UC Berkeley zskatona@berkeley.edu
Marcus O. Painter
Affiliation:
Saint Louis University marc.painter@slu.edu
Panos N. Patatoukas*
Affiliation:
UC Berkeley
Jean Zeng
Affiliation:
National University of Singapore jeanzeng@nus.edu.sg
*
panos@haas.berkeley.edu (corresponding author)
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Abstract

We use the introduction of satellite coverage of major retailers to study the capital market implications of unequal access to big data. Satellite data enabled sophisticated investors with access to such data to formulate profitable trading strategies, especially by targeting the upcoming reports of retailers with bad news for the quarter. The introduction of satellite data led to more informed short-selling activity, less informed individual buying activity, and lower stock liquidity around the reports of retailers with satellite coverage. We conclude that unequal access to big data can increase information asymmetry among market participants without immediately enhancing price discovery.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , First View , pp. 1 - 29
Copyright
© The Author(s), 2024. Published by Cambridge University Press on behalf of the Michael G. Foster School of Business, University of Washington

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Footnotes

We thank RS Metrics and Orbital Insight for providing satellite imagery data of parking lot traffic, and Markit for providing securities lending market data. For helpful comments and discussions, we thank Hendrik Bessembinder (the editor), Chris Clifford, Zhi Da (the referee), Mike Farrell, Jill Fisch, Jillian Grennan, Kristine Hankins, Franz Hinzen (discussant), Russell Jame, Thomas Lee, Tamara Nefedova (discussant), Frank Partnoy, the PhD students at Berkeley Haas, former SEC Commissioner Robert Jackson, the DERA of the SEC, and the members of the University of Chicago Applied Math Club. We also thank seminar participants at the 2018 Miami Behavioral Finance Conference, the University of Florida, the University of Kentucky, the University of Missouri, the 2019 Future of Financial Information Conference at the Stockholm Business School, the 2019 Annual Meeting of the Financial Management Association, Harvard Business School, Kellogg School of Management, and Tulane University. We gratefully acknowledge financial support from the Fisher Center for Business Analytics at Berkeley Haas. This article is the product of merging two related papers, one of which had the current title and another that was titled “Un-Levelling the Playing Fiield: The Investment Value and Capital Market Consequences of Alternative Data.”

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