Deutsche Bank looks to big data for stock price clues

Deutsche Bank looks to big data for stock price clues

Deutsche Bank's research unit has unveiled an interactive web tool that uses big data in an effort to quantify the importance of intangibles, such as environmental and social issues, on stock prices.

The bank notes that by 2020 about 1.7 megabytes of new information will be created every second for every human being on the planet, with the number of smart devices set to pass 50 billion.

Inevitably, data will not only become more available, but also more important, prompting Deutsche Bank to establish a platform called Data Innovation Group (dbDIG), that taps into the power of alternative data and AI to provide data-driven investment solutions.

The platform's first tool, called 'a-DIG', uses Natural Language Processing to quantify the importance of environmental, social and governance issues and other company intangibles such as human capital, innovation, brand value, management quality and environmental sustainability.

As well as scanning a company’s quarterly or annual report for information hidden in footnotes to the accounts, the tool uses data science techniques to sift through the web and analyse how stakeholders - employees, customers and suppliers - perceive the company’s behaviour.

It then uses this information to quantify the company’s intangible assets, such as its corporate culture, reputation and ability to innovate, in order to help clients incorporate this information into their investment approach.

Initially monitoring 5000 companies, the tool has been built in collaboration with Dow Jones, which is providing access to its complete historical news archive, dating back more than 20 years, and live news feeds.

Explaining the tool's value, Andy Moniz, chief data scientist, dbDIG, says: "In today’s service-based economy most of the value of a firm comes from its intangible assets. Unfortunately, under current conservative accounting methods, companies cannot record the value of most of these assets in their financial statements as they are hard to measure.

"Investors know such non-financial information is valuable, but they have to look beyond a firm’s accounts if they want to incorporate this information into their investment decisions."

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