Data Trends for Investment Professionals


Stock Market Data: The Ultimate Guide [Part 2]

Continuing with our guide to stock market data, in this post we will detail the various databases available for analyst ratings and targets, options, futures and indexes, and alternative data. If you haven’t yet read Part One then you may do so by visiting here or else continue reading for Part Two.

Analyst Ratings and Targets

Understanding what other investors and analysts expect from a stock is a key component of forecasting that stock accurately. In certain cases, rosy analyst ratings may reflect a healthy underlying company; in other cases, they may reflect a consensus that is ripe to be faded. Either way, they constitute important data for the informed quant.

Analyst ratings and stock buy/sell recommendations are important. Equally important are the trends in ratings and recommendations. Trend surveys help anchor and contextualize ratings that would otherwise be abstract and theoretical.

For example, if every analyst of a stock downgrades that stock, it does not matter what the absolute rating is for that stock; the price is likely to go down (since the prior stock price encapsulated the former rating, by the efficient markets hypothesis). History and revisions data for stock ratings is thus a critical component of the quantitative toolkit.

Quandl has several ratings databases, ranging from simple buy/sell recommendations and comprehensive prediction databases to historical revisions and trends in analyst forecasts. Some of these are listed below:

  • Market Consensus Master– Complete view of market consensus: earnings, sales, surprises, growth, buy/sell ratings and target prices. Includes all Zacks analyst survey databases. Includes dividend data for free!
  • Analyst Recommendations– Daily buy/sell recommendations for 5,000 publicly traded companies, from 2,600 analysts at 185 firms.
  • Analyst Revisions– Recent estimate and ratings revisions from individual contributing brokers and analysts, updated daily.
  • Analyst Rating History– Historical estimate and ratings revisions for 5,000 companies going back to 1995, updated monthly.
  • Target Price History– Historical and current analyst target prices and revisions for 5,000 publicly traded companies
  • Active Analyst Ratings– Crowd-sourced ratings and recommendations, filtered to include only active analysts.

Ownership and Trading Activity

Sometimes the best predictors of a stock’s performance come from observing the actions – not the opinions — of other market participants.

High-frequency trading (HFT) algorithms, corporate insiders, and institutional investors all affect stock prices in significant ways and they often have specialized information and/or incentives. Knowing how they are acting is an essential part of the analyst’s toolkit.

Many technical trading strategies are based on identifying levels of support, resistance, strength and weakness in the market, which are manifestations in price space of the aggregate activities of many other traders. These too are important pieces of information for the stock market analyst.

In some cases, market participant actions are publicly known, albeit usually with a lag, due to regulatory reporting requirements. In other cases, it is possible to infer actions from secondary signals, using clever analytical techniques. Inferred signals may be less accurate but they are more valuable to traders since they are largely contemporaneous with the actual market activity they measure.

  • Institutional Ownership Data– Detailed institutional ownership information for 6,000 US equities
  • Insider Metrics– Holdings and transactions for company insiders, from SEC Form 4 filings. Officers and Directors tracked separately
  • Holder Metrics– Holder metrics for institutional and insider shareowners; focus on distribution, rotation, concentration and holder style

Stock Options, Volatility and Risk

Stock option prices and volumes encapsulate a huge amount of information about the stock: bullish and bearish sentiment, expected riskiness, time horizons of market participants, position size, breakeven points, cost and stop levels, and much more. The experienced analyst can glean a wealth of market positioning data merely by inspecting activity in the options market.

Quandl has a variety of stock option data. The basics include current and historical stock option prices and stock option volatility, calculated both close-to-close and tick-by-tick. More advanced data includes put/call ratios, open-interest ratios, skew and smile analytics, breakevens, risk factors and more. The following databases are available on Quandl:

Stock Futures and Indexes

Stock futures and stock indexes offer alternative methods for participants to gain exposure to equity markets. They allow investors to target specific sectors and styles in a much more efficient manner than buying/selling dozens of individual names. Furthermore, in many cases, futures and indexes are more liquid than the underlying constituent stocks; they are also easier to take short positions in. For these reasons, stock futures and indexes often see more trading volume than individual stock tickers.

Index arbitrage involves buying and selling stocks as they enter or leave an index, in anticipation of subsequent position rotation by large institutional players. (Stocks that are part of major indexes command a premium versus those that are not). This is a lucrative source of returns for analysts who can successfully predict index composition changes, using stock fundamentals or other data.

  • Continuous Futures Contracts– Long-term chained histories for 78 futures contracts accounting for majority of US trading volume; choice of roll-date and price-adjustment methods for concatenation
  • Reference Futures Contracts– Price series for 12,000 individual futures contracts. 50 symbols, 50 years of history; Covers major US and global exchanges.
  • Eurex Futures– Price histories for 70 contracts traded on Eurex, including DAX, Stoxx, MSCI World.
  • LIFFE Commodities Futures– Price histories for 50 contracts traded on LIFFE, including AEX, BEL, CAC, PSI, TOPIX, FTSE
  • Global Index Prices– Definitive collection of global equity indexes; all major benchmarks included; decades of history.
  • Global Index Data– Over 35,000 sector and style indexes, including global equity, FI, green, Nordic and Sharia; published by NASDAQ OMX

Alternative Data

In addition to hosting core financial databases, Quandl is also the premier source for alternative data, that is, data which produces an informational advantage for professional investors. Armed with this data, investors are able to beat benchmarks and generate what is known as “alpha” in Wall Street’s parlance. But previously unknown information rarely remains that way, which is why investors are always looking for new sources of alpha. We call this concept the diffusion of alpha.

Here at Quandl, we invest significant time and resources into sourcing only the highest quality alternative data. It begins with a market hypothesis, thorough analysis and data cleaning before our sales and marketing teams connect the right investor with the right product. As we hope to preserve the alpha within, we are often highly selective about who can buy and how many times we can sell a particular dataset.

Alternative data sources can cover a very broad range of sectors and asset classes. Examples of datasets used by investment professionals can include:

  • Automotive — GPS and telematics data from cars
  • Sentiment Data — Data sourced via natural language processing to aggregate a subjective opinion
  • Business to Business — Business health metrics from credit platforms
  • Customer Insights — App downloads and usage from telecommunications providers
  • Human Resources — Job listing data from digital job boards
  • Logistics — Cargo transport data recorded through device-equipped fleets
  • Retail — Consumer footfall and transaction data

The variety of alternative data for alpha generation continues to increase. If you are an institutional investor interested in any of these alternative databases, please contact us. Alternatively, to begin using any of the databases listed above, simply sign up for a free Quandl account (no credit card required) to start making calls.

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