{"title":"Equilibrium Data Mining and Data Abundance","authors":"JÉRÔME DUGAST, THIERRY FOUCAULT","doi":"10.1111/jofi.13397","DOIUrl":null,"url":null,"abstract":"We study theoretically how the proliferation of new data (“data abundance”) affects the allocation of capital between quantitative and nonquantitative asset managers (“data miners” and “experts”), their performance, and price informativeness. Data miners search for predictors of asset payoffs and select those with a sufficiently high precision. Data abundance raises the precision of the best predictors, but it can induce data miners to search less intensively for high‐precision signals. In this case, their performance becomes more dispersed and they receive less capital. Nevertheless, data abundance always raises price informativeness and can therefore reduce asset managers' average performance.","PeriodicalId":15753,"journal":{"name":"Journal of Finance","volume":"31 1","pages":""},"PeriodicalIF":7.6000,"publicationDate":"2024-10-28","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Journal of Finance","FirstCategoryId":"96","ListUrlMain":"https://doi.org/10.1111/jofi.13397","RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
引用次数: 0
Abstract
We study theoretically how the proliferation of new data (“data abundance”) affects the allocation of capital between quantitative and nonquantitative asset managers (“data miners” and “experts”), their performance, and price informativeness. Data miners search for predictors of asset payoffs and select those with a sufficiently high precision. Data abundance raises the precision of the best predictors, but it can induce data miners to search less intensively for high‐precision signals. In this case, their performance becomes more dispersed and they receive less capital. Nevertheless, data abundance always raises price informativeness and can therefore reduce asset managers' average performance.
期刊介绍:
The Journal of Finance is a renowned publication that disseminates cutting-edge research across all major fields of financial inquiry. Widely regarded as the most cited academic journal in finance, each issue reaches over 8,000 academics, finance professionals, libraries, government entities, and financial institutions worldwide. Published bi-monthly, the journal serves as the official publication of The American Finance Association, the premier academic organization dedicated to advancing knowledge and understanding in financial economics. Join us in exploring the forefront of financial research and scholarship.