Unlevelling the Playing Field: The Investment Value and Capital Market Consequences of Alternative Data

Abstract

We use the introduction of satellite coverage of major retailers to study the capital market implications of unequal access to alternative data. We find that satellite data allowed sophisticated investors to formulate profitable strategies, especially by targeting the quarterly reports of retailers with bad news. Using a difference-in-differences design, we also find that the release of satellite data led to more informed short selling activity, less informed individual trading, and lower stock liquidity around the earnings announcements of retailers with satellite coverage. Overall, our paper provides new evidence that unequal access to alternative data can increase information asymmetry among market participants.