Equilibrium Data Mining and Data Abundance
Dugast, Jérôme; Foucault, Thierry (2021), Equilibrium Data Mining and Data Abundance, 15th Annual Financial Intermediation Research Society (FIRS) Finance Conference, 2021-06, Online
TypeCommunication / Conférence
Conference title15th Annual Financial Intermediation Research Society (FIRS) Finance Conference
MetadataShow full item record
Dauphine Recherches en Management [DRM]
Groupement de Recherche et d'Etudes en Gestion à HEC [GREGH]
Abstract (EN)We analyze how computing power and data abundance affect speculators’ search for predictors. Speculators search for predictors through trials and optimally stop searching when they find a predictor with a signal-to-noise ratio larger than an endogenous threshold. Greater computing power raises this threshold by reducing search costs. In contrast, data abundance can reduce this threshold because (i) it intensifies competition among speculators and (ii) it increases the average number of trials to find a predictor. We derive implications of these findings for the distribution of asset managers’ skills and trading profits and the informativeness of asset prices.
Subjects / KeywordsAlternative Data; Data Abundance; Price Informativeness; Search for information
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