Budgets and alternative data

We all have budgets in mind for certain things. If someone offered me a burger for 1000 GBP, well, I'd probably have to politely decline. If someone offers me a house for 1000 GBP, well, that seems like good value! Our budgets are related to what we perceive as being "good value". Ok, that's fairly obvious.

When it comes to alternative data, one thing of the most difficult problems is trying to value a dataset and it is something that Alexander Denev and I discussed at length in The Book of Alternative Data. How you value a dataset will depend upon your perspective. The data vendor will have one way of valuing it, namely the cost of production and the margin they might be able to charge on top of that. The user's perspective will differ depending on whether they are a discretionary trader or a systematic trader.

For a systematic trader, they will try to quantify the value of a dataset, by assessing how much additional alpha it can offer versus existing models. If a dataset is very profitable, but seems to deliver..

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