{"id":376,"date":"2017-03-13T10:00:19","date_gmt":"2017-03-13T14:00:19","guid":{"rendered":"http:\/\/www.focus262.com\/blog\/?p=376"},"modified":"2017-03-12T17:38:10","modified_gmt":"2017-03-12T21:38:10","slug":"analytics-is-more-like-fishing-than-rocket-science","status":"publish","type":"post","link":"https:\/\/www.focus262.com\/blog\/2017\/03\/analytics-is-more-like-fishing-than-rocket-science\/","title":{"rendered":"Analytics is more like fishing than rocket science"},"content":{"rendered":"<p><span style=\"font-weight: 400;\">Quantitative investment firms such as Two Sigma, AQR, Dimensional, etc. have built their success on a foundation of data and analytics. Asset owners, financial advisors, and fundamental asset managers now have an opportunity to use similar analytics and approaches to improve their decision making and better meet their investment objectives.<\/span><\/p>\n<p>The barriers to using data analytics to make investment decisions have been greatly lowered over the last few years, with increased availability of data, low cost computing power, and tools for analysis and visualization. However, tools alone cannot provide results, and the critical element to generating results from data analytics is understanding how decision makers psychologically and physically want to interact with data and analytics. This makes data analytics less of rocket science and more like fishing.<\/p>\n<p>As part of a recent presentation I made at a Moody\u2019s Analytics conference, I created the graphic above comparing data analytics to fishing:<\/p>\n<p>In an organization, there are folks who<\/p>\n<ul>\n<li><span style=\"font-weight: 400;\">Like to fish on their own &#8211; i.e. they just want access to data and then will perform their own analysis and come to their own conclusions<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Prefer to buy fish from the market &#8211; i.e., they like to have the data gathered and cleaned for them, so that they can then interpret the results<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Like to eat their fish in a restaurant, prepared by a chef, and served on a platter &#8211; i.e., they want the results delivered to them<\/span><\/li>\n<\/ul>\n<p>Investment decisions can be improved using analytics by identifying the specific preferences of the person making decisions. Note that I intentionally use the word person, and not organization or team. This is to emphasise that effective solutions need to take into account the individual decision maker\u2019s approach and biases.<\/p>\n<p>Several asset managers and financial advisors that I have spoken to see the value that analytics can bring to their decision making process but struggle with application. One potential reason is that decision makers might be expecting customized recommendations specific to their situation. For example, a portfolio manager at a hedge fund might want investment recommendations based on cross referencing their personal investment approach with social chatter, but is provided with expensive tools that only get them the raw data, and its up to the portfolio manager or their analyst to make sense of the relationships and put it into practice.<\/p>\n<p>Similarly, an investment advisor\u2019s goal might be to identify the portfolio of assets that best meet their client\u2019s behavioral and economic objectives. While they might have access to several tools and databases, they might prefer being served the portfolios based on some objective and subjective criteria on a regular basis.<\/p>\n<p>In these examples, human experience can ensure that we don\u2019t end up providing the customer in the restaurant with a fishing pole.<\/p>\n<p>Further reading:<\/p>\n<ul>\n<li><a href=\"http:\/\/www.slideshare.net\/AmitSinha61\/staying-agile-in-dynamic-markets-amit-sinha-march-2017\">Excerpt of my presentation at the Moodys Analytics Breakfast event<\/a><\/li>\n<li><a href=\"http:\/\/www.maknowledgeservices.com\/moodys-analytics-knowledge-services-hosts-session-on-how-to-stay-agile-in-dynamic-markets-in-new-york\/\">Moodys Analytics Knowledge Services<\/a><\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>Quantitative investment firms such as Two Sigma, AQR, Dimensional, etc. have built their success on a foundation of data and analytics. Asset owners, financial advisors, and fundamental asset managers now have an opportunity to use similar analytics and approaches to <a class=\"more-link\" href=\"https:\/\/www.focus262.com\/blog\/2017\/03\/analytics-is-more-like-fishing-than-rocket-science\/\">Read More &#8230;<\/a><\/p>\n","protected":false},"author":1,"featured_media":374,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"nf_dc_page":"","_exactmetrics_skip_tracking":false,"_exactmetrics_sitenote_active":false,"_exactmetrics_sitenote_note":"","_exactmetrics_sitenote_category":0,"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false},"version":2}},"categories":[8,6],"tags":[],"class_list":["post-376","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-asset-allocation","category-technology"],"jetpack_publicize_connections":[],"jetpack_featured_media_url":"https:\/\/i0.wp.com\/www.focus262.com\/blog\/wp-content\/uploads\/2017\/03\/fishing.png?fit=908%2C642&ssl=1","jetpack_sharing_enabled":true,"jetpack_shortlink":"https:\/\/wp.me\/p6zs9k-64","jetpack-related-posts":[],"_links":{"self":[{"href":"https:\/\/www.focus262.com\/blog\/wp-json\/wp\/v2\/posts\/376","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.focus262.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.focus262.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.focus262.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.focus262.com\/blog\/wp-json\/wp\/v2\/comments?post=376"}],"version-history":[{"count":1,"href":"https:\/\/www.focus262.com\/blog\/wp-json\/wp\/v2\/posts\/376\/revisions"}],"predecessor-version":[{"id":377,"href":"https:\/\/www.focus262.com\/blog\/wp-json\/wp\/v2\/posts\/376\/revisions\/377"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.focus262.com\/blog\/wp-json\/wp\/v2\/media\/374"}],"wp:attachment":[{"href":"https:\/\/www.focus262.com\/blog\/wp-json\/wp\/v2\/media?parent=376"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.focus262.com\/blog\/wp-json\/wp\/v2\/categories?post=376"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.focus262.com\/blog\/wp-json\/wp\/v2\/tags?post=376"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}