While some have criticized big data as a result of experts debunking some high-profile models, the fact that these models can be resilient at a time when information is changing makes them quite valuable, a financial expert wrote in a recent Forbes opinion piece.
Adam Ozimek, who works for an economic consulting firm, asserted that since the available information is constantly changing, users of big data can leverage it to repeatedly test their available models.
Buy-side firms should embrace flexibility of models
Companies in this space might benefit from keeping this characteristic in mind at a time when many want to utilize the vast information available to either get a leg up on the competition or further their organization.
For example, financial institutions such as asset managers and pension managers could harness big data in an effort to obtain greater insight into key matters such as the trends of both clients and prospects. Armed with this information, these buy-side firms could potentially make important changes to their financial performance such as bolstering revenue or enhancing profitability. In addition, companies can use big data as a key tool in risk management.
Challenges in harnessing big data
While the prospect of deriving these benefits may sound appealing, it is important to keep in mind that having access to vast troves of information is one thing, and using it to glean key insights is something else entirely.
Companies on the buy-side could potentially encounter a lot of challenges in their efforts to derive benefit from available information. These firms might want to remain skeptical of any available models, as taking such an approach makes it easier to invalidate them if they aren’t working.
The author emphasized that big data will likely become increasingly prominent over time. If this prediction ends up being accurate, buy-side financial institutions would do well to get a better sense of how they can leverage all the available information.
Companies should keep headwinds in mind
These industry participants should also keep in mind the various other pressures they will need to contend with as they seek to leverage big data to attain a competitive advantage. Before they worry about getting a leg up on the competition, these companies must consider that they are facing demands to process an ever-growing supply of information and do so while using a shrinking budget. In addition, these organizations need to devote a growing amount of resources to comply with the current framework of rules and regulations.
- RIMES in the Time of Corona: Making Sense of Volatility
- Asset Management Firms are Changing their Data Management Approach in Response to Increasing Market Data Costs, RIMES’ Survey Reveals
- COVID-19 and ETFs: July Market Update
- Comprehensive ETF Data Now Available on RIMES Online
- BMR and the US: What We know