This untapped resource could be the new frontier in investment research.

Chances are, you are reading this on a digital device. You will have gotten here by clicking your mouse or tapping that screen a few times to open an email, select a link and identify your investor status on our website. Perhaps you are reading it on the train? You probably used a travelcard to get onto the platform—with two or three CCTV cameras watching you do it, and some satellites, too, if your phone has GPS technology. Maybe you’ll enjoy this enough to share the link on Twitter or LinkedIn.

Every minute of every day, we are all generating data. Mountains of it.

In fact, IBM has claimed that human beings, with all of their new devices, sensors and other technologies, generate 2.5 quintillion bytes (yes, that’s QUINTILLION!) of data every day. To put it another way, 90% of all the data that has been created since the beginning of human history has been created in the past two years.

Digital Residue

The proliferation of these sets of so-called Big Data was behind Neuberger Berman’s decision to appoint its first Chief Data Scientist, Michael Recce. Michael, who has a background in machine learning and artificial intelligence, has a name for the things I described in my first paragraph: “digital residue.”

We can learn a lot about a public company from its accounting statements. That is why stock prices tend to exhibit bigger moves during “earnings season,” when this information is made public.

But that information can be dramatically enhanced with the digital residue left—often in real time—by that company, its partners in the supply chain, its customers and the media (both social and otherwise). Properly collected, monitored and analyzed, it can uncover unseen patterns at the macroeconomic, industry and company level. 

We envision Big Data helping us to discern intermediate- to longer-term fundamental trends, and ultimately enabling us to make better investment judgments as a result. We don’t foresee playing the “incremental data-point game”—trying to trade securities frequently to take advantage of some minor data point leading to small moves in securities pricing. We are not traders, we’re investors.

‘Quantamental’

In our view, the Big Data Holy Grail in investment management will be the combination of good, old-fashioned fundamental analysis with quantitative investment techniques—what we call the “quantamental” approach.

“Quants” are typically far more advanced in their portfolio construction and risk management approach, but can sometimes be susceptible to looking too much at past patterns of market movements. Fundamental managers focus much more on forward-looking analysis, such as trying to predict the future course of earnings growth. Big Data can feed naturally into both of these two worlds.

Bringing human intuition and judgment together with machine learning and bringing informed forecasts together with historical patterns, a “quantamental” approach gives investors a 360-degree view of their companies and the world in which they operate. Big Data has the potential to give that view depth, granularity and timeliness. We believe this is the new frontier of investment research.


Joseph V. Amato is President of Neuberger Berman Group LLC and Chief Investment Officer—Equities at Neuberger Berman. He is also a member of the firm’s Board of Directors and its Audit Committee. To learn more, see Mr. Amato's bio or visit www.nb.com.

In Case You Missed It

  • U.S. New Home Sales:  +6.2% to SAAR of 685,000 units in October
  • Case-Shiller Home Prices Index:  September home prices increased 0.4% month-over-month and increased 6.2% year-over-year (NSA); +0.5% month-over-month (SA)
  • U.S. Consumer Confidence:  +3.3 to 129.5 in November
  • U.S. 3Q17 GDP (Second Estimate):  +3.3% annualized rate
  • U.S. Personal Income & Outlays:  Personal spending increased 0.3%, income increased 0.4%, and the savings rate decreased to 3.2% in October
  • ISM Manufacturing Index:  -0.5 to 58.2 in November

What to Watch For

  • Tuesday, 12/5:
    • ISM Non-Manufacturing Index
  • Friday, 12/8:
    • U.S. Employment Report

– Andrew White, Investment Strategy Group

Statistics on the Current State of the Market – as of December 1, 2017

Market Index WTD MTD YTD
Equity      
S&P 500 Index 1.6% -0.2% 20.3%
Russell 1000 Index 1.5% -0.2% 20.1%
Russell 1000 Growth Index 0.4% -0.4% 28.7%
Russell 1000 Value Index 2.7% 0.0% 12.1%
Russell 2000 Index 1.2% -0.5% 14.6%
MSCI World Index 0.5% -0.4% 20.9%
MSCI EAFE Index -0.9% -0.8% 22.6%
MSCI Emerging Markets Index -3.3% -0.4% 32.3%
STOXX Europe 600 -1.3% -1.2% 22.6%
FTSE 100 Index -1.5% -0.4% 6.2%
TOPIX 0.9% 0.2% 20.6%
CSI 300 Index -2.6% -0.2% 23.2%
Fixed Income & Currency
Citigroup 2-Year Treasury Index 0.0% 0.0% 0.3%
Citigroup 10-Year Treasury Index -0.1% 0.5% 2.4%
Bloomberg Barclays Municipal Bond Index 0.0% 0.4% 4.7%
Bloomberg Barclays US Aggregate Bond Index 0.0% 0.3% 3.4%
Bloomberg Barclays Global Aggregate Index -0.2% 0.0% 7.0%
S&P/LSTA U.S. Leveraged Loan 100 Index 0.2% 0.0% 3.0%
ICE BofA Merrill Lynch U.S. High Yield Index 0.1% 0.0% 7.2%
ICE BofA Merrill Lynch Global High Yield Index 0.0% -0.1% 9.7%
JP Morgan EMBI Global Diversified Index 0.2% 0.1% 9.6%
JP Morgan GBI-EM Global Diversified Index 0.0% -0.2% 12.7%
U.S. Dollar per British Pounds 1.0% -0.3% 9.2%
U.S. Dollar per Euro -0.6% -0.5% 12.5%
U.S. Dollar per Japanese Yen -1.1% -0.8% 3.4%
Real & Alternative Assets
Alerian MLP Index 3.0% 1.4% -9.5%
FTSE EPRA/NAREIT North America Index -0.3% 0.3% 4.6%
FTSE EPRA/NAREIT Global Index -0.4% 0.0% 12.9%
Bloomberg Commodity Index -0.6% 0.9% -0.3%
Gold (NYM $/ozt) Continuous Future -0.4% 0.4% 11.3%
Crude Oil (NYM $/bbl) Continuous Future -1.0% 1.7% 8.6%

Source: FactSet, Neuberger Berman.