Does Big Data Improve Financial Forecasting? The Horizon Effect

Olivier Dessaint, Thierry Foucault and Laurent Frésard
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Olivier Dessaint: INSEAD
Laurent Frésard: Universita della Svizzera italiana (USI Lugano)

No 1402, HEC Research Papers Series from HEC Paris

Abstract: Existing research suggests that alternative data is mainly informative about short-term future outcomes. We show theoretically that the availability of short-term oriented data can induce forecasters to optimally shift their attention from the long-term to the short-term because it reduces the cost of obtaining short-term information. Consequently, the informativeness of their long-term forecasts decreases, even though the informativeness of their short-term forecasts increases. We test and confirm this prediction by considering how the informativeness of equity analysts' forecasts at various horizons varies over the long run and with their exposure to social media data.

Keywords: Big data; Financial analysts forecasts; Forecasting horizon; Forecasts informativeness; Social media (search for similar items in EconPapers)
JEL-codes: D84 G14 G17 M41 (search for similar items in EconPapers)
Pages: 67 pages
Date: 2020-11-17
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Related works:
Working Paper: Does Big Data Improve Financial Forecasting? The Horizon Effect (2020)
Working Paper: Does Big Data Improve Financial Forecasting? The Horizon Effect (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:ebg:heccah:1402

DOI: 10.2139/ssrn.3702411

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