Big data tools, Predictive analytics & ETF investment strategies

NASDAQ

Stockholm 21 oktober 2014

Lars Hamberg

•What is Big Data Predictive Analytics?

•Can it be used to create alpha in ETF and Index investing?

PREDICTION & QUESTIONS

Over the next two years the New OSINT Technology will have a transformative impact on the financial industry.

Democratic? Winners & Losers?

Commercial applications? Open Source Intelligence? Financial applications?

Lots of data: Scalability issues

Computational Semantics, Memory Models, Deep Learning, Cognitive Computing, etc. in display

Watson Debater & Watson Analytics, inter alia

The Big Data Challenge

Bottleneck or “Why most will fail”

Traditional vs. Next Generation tools

TRADITIONAL = limitations of brute force

NEXT GENERATION = neurologically plausible models

Predictive analytics have helped elect presidents, discover new energy sources, score consumer credit, assess health care risks, detect fraud and more

GREEK ELECTIONS

Real Time Analysis & Accurate Predictions

Ebola

Volume weighted topic structure of “Ebola” mentions in open Internet sources

First U.S. Patient Thomas Eric Duncan Dies of “Insidious Disease” Ebola

Topic structure for “Submarine”

Submarine - raw frequency of concept mention

Submarine

Ubåt - raw frequency of concept mention

“Submarine” “Swedish”

“Stockholm”

17 Oct. 19 Oct. 18 Oct. 20 Oct.

Financial Applications of

Big Data Predictive Analytics

- Indices (Index ETFs) vs. Single Stock?

- Factor investing, “Styles”

- Promise of next generation technology

- Long term performance studies

Patterns of worries, fears etc. etc. etc., gauged on all open (c/w “free”) Internet sources in real time for any concept in any language. The Fear Index is no longer science fiction.

Fixed Income Index (ETF) Barclays U.S. 20+ Year T Bond Index L/S, L/N, TR (div adj.)

incl. 50 bps transaction cost

Equity Index (ETF) FTSE MIB L/S, L/N, TR (div adj.)

incl. 50 bps transaction cost

Commodity (Commodity ETF) Gold Spot L/S, L/N, TR

incl. 50 bps transaction cost

Fixed Income Index (ETF) JPM EMBI Global Core Index L/S, L/N, TR (div adj.),

incl. 50 bps transaction cost

Equity Index (ETF) MSCI ACWI L/S, L/N, TR (div adj.),

incl. 50 bps transaction cost

29 months portfolio strategy performance simulation: Barclays 20+ Yr Tr. Bond, FTSE/Xinhua China 25 Index, Nikkei 225, MSCI World Index, MSCI Emerging Markets Index, MSCI India, MSCI Chile IMI, MSCI EM EMEA Index, EURUSD, VIX S&P500; Equal weighted underlying w/o rebalancing vs. long/short strategy, incl. transaction costs

DBX DAX 1C & DBX ShortDAX, Long/Short Strategy - incl. 50 bps transaction cost vs. DBX DAX, Long only

DBX LevDAX & ShortDAXx2, Long/Short Strategy - incl. 50 bps transaction cost vs. DBX LevDAX

OMXS30 Long/Short Strategy, based on big data predictive analytics - incl. 50 bps transaction cost vs. OMXS30 Long only

XACT OMXS30 Long/Neutral Strategy, based on big data predictive analytics - incl. 50 bps trans. cost vs. XACT OMXS30 Long only

Prediction

“Over the next two years the New OSINT Technology will have a transformative impact on the financial industry”

Back to the beginning

Q: What is Predictive Analytics (in the context of next generation OSINT technologies)?

Q: Can (commercial applications of these technologies) be used to create alpha in ETF and Index investing?

The mystery.

Seeing is believing, right? So, how can we monitor and assess predictions?