Eagle Alpha White Paper

5/22/2018 Eagle Alpha White Paper

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Discovering The Webs

Hidden AlphaHow the buyside can make full use of

online information

|White Paper

June 2014
http://www.eaglealpha.com/http://www.eaglealpha.com/


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2www.eaglealpha.com| [email protected] | @dollareagle

White Paper - Discovering The Webs Hidden Alpha

How the buyside can make full use of online informationEagle Alpha

able o Contents

Introduction p.3

Te web events that have grabbed Wall Streets attention p.4

Examples o buyside investors already unlocking value o the web p.9

How the buyside are leveraging the web today p.13

10 Examples o how the buyside will leverage the web p.24

Te Eagle Alpha solution p.28
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Wall Street has been hesitant to adopt the web as asource o inormation despite an emerging awarenesso the value it represents. Tis is primarily due to thesignificant amount o noise on the web and complianceconcerns.

Massive amounts o data are being generated everyminute, as we see in this inographic, and the pace o

data creation is accelerating. In act, an IDC DigitalUniverse study finds that the worlds inormationdoubles about every year and a hal1. While the vastmajority o web content is noise, signals are beingound i technology and research analysts are utilizedin the right way.

In addition to this, the majority o Wall Street firmsprevent their employees rom accessing highlyvaluable areas o the web like orums and social mediaor compliance reasons; these sites are not read-onlyand there is a data storage requirement o 5 years

but witter and other social media do not offer thisunctionality.

Tat said, the web is ast becoming an essentialcomponent o the investment process or a widerange o investors on the buyside. Hedge unds, assetmanagers, banks, trading desks, and central banksare among those already leveraging web inormationin different ways. Firms such as Bridgewater, Artemisand Mediolanum Asset Management have publiclydisclosed that they incorporate online inormation

into their investment strategy. Tese firms are blazingthe trail but it is only a matter o time beore the rest othe buyside are aced with a decision: either develop astrategy that incorporates web inormation or get lefbehind.

Tis paper discusses how web inormation is beingleveraged by the buyside today, and how inormationwill be leveraged by innovators in the uture.

Introduction
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Te Web Events Tat Have Grabbed Wall Streets Attention

Some industries have embraced the webs transormative potential aster than others, with the financial services industrylagging significantly behind. Gnip, a subsidiary o witter, estimated that when it comes to adopting social data analyticsthere is a three year lag between the finance sector and the brand/marketing sector2.

Tat said, notable events and inormation released on the web have grabbed Wall Streets attention over the last two years.Tese events have served as a wakeup call or Wall Street; the web is an important source o inormation and certain

buyside firms are already harnessing its potential.

Netflix CEO, Reed Hastings, attracted attention in July o 2012 when he disclosed Netflix viewing numbers on hispersonal Facebook page.

His actions highlighted the uncertainty surrounding the application o Regulation o Fair Disclosure to social media.Te Regulation stated that inormation must be published in a manner reasonably designed to provide broad, non-

exclusionary distribution o the inormation to the public. Hastings deemed that the 245,386 subscribers to his Facebookpage was sufficiently broad.

Netflixs CEO discloses viewing numbers on personalFacebook account (July 2012)

Source: Facebook


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Source: SEC

Te Reed Hastings post prompted an inquiry by the SEC. On 2nd April 2013,the SEC issued guidance stating that companies can use social media outlets toannounce material non-public inormation i the company has taken steps to alertthe market that it intends to disclose inormation through these channels 3.

Source: Bloomberg

SEC gives OK to social media (April 2013)

George Canellos, the Acting Director o the SECs Division o Enorcement notedthat; Most social media are perectly suitable methods or communicating withinvestors, but not i the access is restricted or i investors dont know thats wherethey need to turn to get the latest news.

Tis decision both recognized and reinorced social media as a growing and

increasingly important inormation resource on Wall Street.

Te same week as the SEC issued its guidelines, Bloomberg announced that witter would be available on its terminals.Tis marked a major development as effectively anyone with a Bloomberg terminal was now able to view tweets in a read-only and compliant-riendly ormat.

weets published on the Bloomberg terminal are published on an uncurated basis. For example, the image shows thatthe expected flow o tweets is 47.9 tweets/min. Eagle Alpha offers witter eeds that are highly curated using both

technology and research analysts.

Bloomberg launches witter offering (April 2013)


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Te euro zones bail-out o Cyprus in the early hours o Saturday morning on 16th March 2013 came as a big surprise,but is remembered today or how it highlighted the importance o witter and blogs as a source o inormation or WallStreet.

Investment banks did not issue research until the Monday morning, so Wall Street, in need o real-time inormation andanalysis, turned its attention to social media. Tose looking or local knowledge ollowed bloggers like Yiannis Mouzakis,an emergency specialist blogger, and or analysis Pawel Morski, a und management veteran, was reported to haveprovided the best insights according to Business Insider4.

A Socit Gnrale currency analyst, Kit Juckes, commented on the weekends event and its significance or Wall Streetresearch on his blog; Whether you are a trader, a salesperson, a und manager, a Master o the Universe or indeed aninterested by-stander, what you want is inormation, opinion and debate and witter gives it to you5.

Source: witter

Hacking of the Associated Press witter account bythe Syrian Electronic Army (April 2013)

Te hoax tweet, that reported an explosion at the White House in April 2013, received a hugeamount o media attention as it triggered a 0.9% decline in the S&P 500 in two minutes, wipingoff more than $130bn in value.

Tis incident underlined witters growing influence and demonstrated its potential to movemarkets given the growth o high requency traders using technology to monitor witter activity.Eagle Alphas research analysts detected the hoax by analyzing the content o the tweet which

algorithms could not do. wo o the tweets below are legitimate: which ones and why?

Cyprus bailout (March 2013)


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Carl Icahns tweet disclosing his stake

in Apple (August 2013)

Te activist stockholders inamous tweet about his stake in Apple caused the stock priceto jump instantaneously, adding US$12.5 billion to the market value o Apple.

Icahns tweets are watched closely by Wall Street. Tis was the first o many market-moving tweets by Icahn. Other companies he has disclosed his position and strategy or

are eBay and Netflix.

Te first tweet is fake for the following reasons:

Te word Breaking should have been BREAKING as AP only uses capital letters at the start o each sentence.

Te ake tweet had a capital letter or Explosions, but it should have been lower case. AP does not tend to use words like and when reporting breaking stories, instead preerring the use o a comma.

AP calls the president President Obama not Barack Obama.

Furthermore, there were no other tweets in the Washington area reporting the explosion at that time.

Source: Yahoo FinanceSource: Yahoo Finance

Source: witter


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Source: LinkedIn Source: Yahoo Finance

Ben Edelman, an associate proessor o Harvard Business School in the Negotiation, Organizations and Markets unit,blogged about the video and advertising company Blinkx at the end o January 2014. In his post, Te Darker Side oBlinkx6, he raised serious questions about the companys revenue reporting and business model, concluding: I I tradedin the companies I write about (I dont!), Id short Blinkx.

Te post triggered a 40% slide in Blinkxs share price in the month o February.

Te post by Search Engine Land, a site dedicated toreporting news and inormation on search enginemarketing, revealed that the travel-booking website lost25% o its search visibility on Google afer being penalizedor buying links that helped improve search rankings7.Expedias stock dropped more than 4% in early trading thenext day.

While Wall Street has been late to harness the ull potential o the web, these examples demonstrate the growing importanceo online sources o inormation or the buyside. Te above examples highlight the market-moving potential o certaininormation, as well as the opportunities or sourcing insightul content and analysis. Whilst these examples are short-

term in nature, the web also provides opportunities or longer-term investors, as demonstrated in the ollowing sections.

Blinkx stock hit by blog post of Harvard professor (January 2014)

A post by Search Engine Land showed that Expedia lost 25% of its Googlesearch visibility (January 2014)

Source: Search Engine Land


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While Wall Street may be lagging behind otherindustries in making the most o online inormation,research by Gnip (a witter subsidiary) suggests thatthe adoption o social data analysis in the financialindustry is at the beginning o an inflection point and isset to accelerate rapidly in the near uture: In the past12 months, weve seen both an escalation in the numbero new firms embracing and innovating, as well as early

adoption by some o the larger somewhat risk-averseplayers in the industry.

Seth Mc Guire, director o business development at Gnipsaid that they provide over a dozen large quantitativehedge unds (with minimum $1bn AUM each) with theentire witter firehose. Rob Bailey, CEO o Datasif (theonly other authorized reseller o all o witters data),said that even beore launching in 2011 they receiveda number o calls rom hedge unds and investmentbanks who wanted access to social media eeds8.

Brunswick, the financial communications firm,conducted a 2014 survey; Investor use o Digital andSocial Media. From a sample o 472 buy-side investorsand sell-side analysts across the US, Europe and Asiathey ound that 70% o investors believe that digital media will play an increasing role in uture investment strategy. Justover a quarter o respondents had based an investment decision on inormation sourced rom a blog, and about 15% rommicro-blogging sites like witter or its Asian equivalent, Sina Weibo9.

Clearly certain buyside firms are already making use o online sources o inormation to create competitive advantage butwho are they and how are they doing so?

Only a ew notable exceptions have broadcasted publicly how they have incorporated social media analytics or curated web

content into their investment process, including Bridgewater Associates, Artemis and Mediolanum Asset Management.

Examples o Buy Side Investors Already Unlocking Value o the Web

Source: Brunswick


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Bridgewater have publicly disclosed that they leverage web inormation or real-timeeconomic modelling. Tis macro hedge und uses all tools at their disposal to track the

economy on a day-to-day basis and to be really on the pulse o whats going on. Tisincludes social media data, real-time internet price data and search engine data.

Analyzing web data they search or equivalents o traditional macro indicators. GregJensen, Bridgewaters co-chie executive and co-chie investment officer has said that theyuse sites like Amazon India to track inflation during a balance o payment crisis on amoment-to-moment basis and thus can tell i any sharp currency moves have filtereddown to end prices. Another application mentioned by Jensen is monitoring auto sales bylistening or every time someone says that they buy a new car on Facebook or witter andcomparing this to official statistics released periodically10.

Hedge unds are not the only economic agents using online data to gain a relevant andtimely understanding o economies. Central banks are using Google search data in asimilar way. A study published in 2009 by two MI proessors, Erik Brynjolsson andLynn Wu, ound that it is possible to predict US house prices and sales with search volumedata11. Brynjolsson recognized the significance o this or policy makers: When centralbankers were looking at traditional data, they were essentially looking out the rear-viewmirror. Since their study, many central banks around the world have done their ownstudies and used web data to assess their national economies 12.

Te Bank o England monitors online search data as part o the range o different indicatorsit considers in orming its view about the outlook or the economy o the United Kingdom,

in particular or the housing and labour markets. Tey find that searches or job seekersallowance can help predict unemployment data.

Te Bank o Israel was one o the first central banks to use search data or policy making. Itanalyses keyword counts to gauge consumer demand beore official statistics are released.Te bank computes a monthly index that reflects the health o the economy which isconsidered beore setting Israels benchmark interest rate.

Te Federal Reserve have researched how internet search data can orecast financial marketdata, finding it useul to now-cast, or orecast the trajectory o refinancing applicationsfiled by homeowners through searches or mortgage refinance.

Te Bank o Japan investigated using search data and point-o-sale records to create a newindex o economic indicators that would be updated daily or weekly, instead o monthly.

Ray Dalio, founderof BridgewaterAssociates


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Te Banca dItalias working paper deals with the predictive power o Google searches in

orecasting unemployment.

Te Banco de Espana used search data rom the UK to predict tourism towards Spain byanalysing travel-related queries.

Economists rom the Central Bank o Chile ound that an increase in people browsing orcars predicted an increase in auto-sales.

Te applications o web data and inormation are in the early stages o discovery, but areset to be crucial to real-time understanding o economies.

Other hedge unds and asset managers are sourcing inormation rom the web to gain a competitive advantage. Artemis,a UK-based und manager with 18.6 billion in AUM, differentiates itsel by its use o social media data when raisingassets under management or the Artemis UK Growth Fund and the Pan Euro Hedge Fund. As we see in the slidebelow, to their traditional our pillars o portolio and security selection they have added social media. Tey seek specificcompany colour insights rom the web.

Tim Steer, Equity Fundmanager at Artemis,remarked:

Social media is anincreasingly important partof understanding companies,particularly as traditionalsources of information oncompanies have becomequieter: Closer regulatoryscrutiny means thatcompanies are more cautiouswith information disclosure,and investment analysts areproviding ever less insight.Adding this new element tomy investment process hashelped raise AUM.

Source: Artemis


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=Mediolanum Asset Management have similarly integrated social media into the investment process. Tis graphicshows how they leverage inormation rom Google rends, witter and investment blogs as an important step in theprocess o identiying opportunities.

A Senior Portolio Manager o Mediolanum Asset Management explained urther:Med3 utilizes a combination o undamental and technical analysis combined with an appreciation o investorsentiment and positioning to determine where an asset is in its investment cycle. For the latter we invest with themomentum until the sentiment becomes extreme and this is where we take a contrarian position. We have a numbero sources or determining investor positioning and sentiment including und flows, institutional and retail surveys.

Source: witter

Source: Mediolanum

We also leverage the web to determine sentiment in the marketsthrough witter. We also utilize Google trends to analyses whetherthe requency o news stories on a topic has become so extreme as

to indicate a potential inflection point.High requency traders leverage inormation rom the web. As


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mentioned previously, the Associated Press hash crash revealed that, as well as scanning news sources, HFs arescanning social media, like witter. In just two minutes the tweet drove 140 points off the Dow Jones Industrial

Average.How the Buyside are Leveraging the Web oday

Te internet can meet the varied needs o different types o buyside investors, as well as leading to timelier and more

astute applications o economic policies. In the ollowing section we reveal examples o how the buyside are currentlyleveraging the web today, including several use cases o Eagle Alpha.

Stocks Traders

Alpha Generation

raders can gain a decisive advantage over their rivals by trading based on inormation sourced online. Everydayinormation that causes stocks to rise (or all) breaks on social media beore a traditional newswire picks it up and reportsit to the market.

For example, on 11th April 2014 Charles Gasparino o Fox News tweeted that Herbalie was bracing itsel or an exposeon the companys business practices. Te stock ell 5.5%. Subsequently the F tweeted a more serious story that the FBIand DOJ are undergoing a criminal probe o its practices. Te two tweets beat traditional wires and altogether the stockell over 15%.

rading a ew minutes ahead o the market can generate alpha. Freelance journalists or people close to the source o dealsofen break news first. For example, a reelance business reporter tweeted that KKR was secretly building a stake o almost5% in US-listed Marvell echnology, a semiconductor business, in November 2013. Te stock was up 10% on the tweet

and there was a seven minute lag beore it appeared on traditional wires.

Paying attention to unconfirmed news rom reliable sources can be an important source o alpha too. In January 2014

Buyside

Stocks

Traders

Alpha Generation (Pg.13)

Risk Mitigation (Pg. 15)

Real-time Insight( Pg.15)

Portfolio Managers

CEO Commentary (Pg.15)

Employee Views (Pg. 16)

Due Dilligence (Pg. 17)

Research Analysts

Crowd based forecasts (Pg.18)

Unique Colour not on RNS (Pg.18)

Data-driven Signals&Insights (Pg.19)

Macro

Traders

Actionable Insights (Pg.19)

Risk Mitigation (Pg.20)

Real-time Insights (Pg.21)

Portfolio Managers

Sina Weibo Inights (Pg.21)

Predictive Modelling (Pg.22)

Views of Expert Bloggers (Pg.22)

Research Analysts

US Inflation Insights (Pg.23)

UK Housing Insights (Pg.23)

Baidu Index (Pg.24)


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Source: Eagle Alpha and Bloomberg




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F Alphaville stated that there was a rumour that there was interest roman unnamed Canadian bank in F&C Management. F&C subsequently

released a statement, 34 minutes later, confirming that they received afirm offer o 120p per share. Te stock increased 21% on the headlines.

Risk Mitigation

Unexpected news can have a major impact on asset prices. Risk can bemitigated by paying attention to the web. In January 2012, the Carnivalcruise ship, Costa Concordia, hit the rocks off the coast o Italy. A travelwriter on board started tweeting about the disaster. Carnival shares weretrading at more than $34 in New York, leaving a 25 minute window toreact beore the markets closed or the weekend. Te shares opened theollowing week at $2913.

All types o inormation on the web can cause stock prices all. As alreadydiscussed, expert commentary contained in the blog posts about Blinkxand Expedia hit these companies stocks, causing a gradual 40% declinein Blinkxs share price over the course o the subsequent month, and analmost immediate drop in Expedias by 4%.

Real-time Insight

Access (via Eagle Alpha) to the witter firehose o 15 billion tweets per

month gives traders real time insight as they can monitor witter or inormation that may not appear on traditionalsources immediately. We see below that when a Google employee announced the launch o their Panda update there wasa peak in tweet volume containing $ebay as eBays organic search ranking took a huge hit and traders turned to witterto share insights.

Stocks - Portfolio Managers

CEO commentary

Portolio managers monitor companies that they hold a stake in, or are considering investing in. Listening to what theCEO is saying, on his/her blog or witter account, is a great source o inormation, particularly or industry commentary,

Source: Eagle Alpha

Source: witter


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Source: witter Source: LinkedIn

company announcements and results updates. Certain CEOs have embraced digital communication more than others.Examples o CEOs who have particularly engaged with the medium to provide insightul commentary on company

direction and perormance updates are Jeff Immelt (General Electric), Jeff Weiner (LinkedIn) and John Donahoe (eBay).

Employee viewsAnalysis o commentary provided by current and ormer employees can reveal sentiment towards management, work

Source: Glassdoor


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Source: Fenzhi

Source: Youube

culture, salaries and benefits, and quality o employees. Glassdoor.comis one o the most popular employment sites worldwide, operating in190 countries. Fenzhi.com is one o Chinas most popular employerreview websites. Below are a selection o opinions expressed romemployees o Salesorce.com, which is ofen commended or beingone o the best companies to work or, and employees o AlibabaGroups subsidiary aobao.

Due diligence

Using inormation rom the web can help portolio managers in theresearch and due diligence process. Tere are numerous sourceso inormation that can be used, but an interesting one, whichportolio managers do not ofen take advantage o, is videos. eslaare particularly good at giving behind-the-scenes tours o theirproduction lines and product demos. Senior test engineers discuss

details o materials and production line processes. Click here or a
http://www.eaglealpha.com/mailto:enquiries%40eaglealpha.com?subject=Enquiry%20from%20White%20Paperhttp://www.twitter.com/dollareaglehttp://www.eaglealpha.com/http://www.youtube.com/watch%3Fv%3D8_lfxPI5ObMhttp://www.youtube.com/watch%3Fv%3D8_lfxPI5ObMhttp://www.youtube.com/watch%3Fv%3DIaU6DWb0yzshttp://www.youtube.com/watch%3Fv%3D8_lfxPI5ObMhttp://www.eaglealpha.com/http://www.twitter.com/dollareaglemailto:enquiries%40eaglealpha.com?subject=Enquiry%20from%20White%20Paperhttp://www.eaglealpha.com/


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peek inside eslas Robotic actory.

Consumer or expert product demo videos are valuable as they can

offer unbiased opinions. For example, there have been numerousproduct demos or Google glasses, showing the new technologyin action, and discussing certain drawbacks. Click hereto sharethe experience o a day wearing Google glasses

Stocks - Research Analysts

Crowd based orecasts

Increasingly the internet is being used as a way o leveraging thepower o the crowd, with crowd sourcing and crowd undingbecoming more and more popular. Estimize.com, an openplatorm or sharing earnings estimates, taps into the power o the

crowd. Tis site aims to create a more accurate and representativeconsensus expectation by crowdsourcing earnings estimates.Estimize aggregate the predictions and posts o contributinganalysts and post them next to the Wall Street consensus orecast.

Source: Estimize

Hedge und investors, independent analysts, independent traders and investors and corporate finance proessionalswho have interesting viewpoints all contribute to the dataset, making the figures very powerul. Estimize states thatits consensus is more accurate than Wall Street 69.5% o the time. Contact us i you would like an introdroduction toEstimize.

Unique colour not on RNS

Te Internet is a great source o unique color on stocks and companies. Research analysts who are not allowed accesswitter on their work devices can miss out on important inormation on social media, particularly rom the likes o

CEOs, analysts and experts.Commentary rom executives when they are speaking at conerences can be particularly insightul. Below are three

Source: witter

Source: witter
http://www.eaglealpha.com/mailto:enquiries%40eaglealpha.com?subject=Enquiry%20from%20White%20Paperhttp://www.twitter.com/dollareaglehttp://www.eaglealpha.com/http://www.youtube.com/watch%3Fv%3DIaU6DWb0yzshttp://www.youtube.com/watch%3Fv%3DIaU6DWb0yzshttp://www.eaglealpha.com/http://www.twitter.com/dollareaglemailto:enquiries%40eaglealpha.com?subject=Enquiry%20from%20White%20Paperhttp://www.eaglealpha.com/


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tweets by Eric Savitz, a specialist in corporate and media strategy with Brunswick. He is citing the Netflix CEO at theCodecon conerence in May 2014.

Commentary on social media around product launches also provide great colour or analysts. Te ollowing are exampleso views post the Amazon Smartphone launch:

Data-driven Signals and Insights

Analysis o witter and Google or specific companies can reveal interesting insights on how products and services arebeing perceived. All o witters firehose can be processed to analyze sentiment towards a company over a period o time.All tweets containing the companys name are identified as either positive or negative.

Eagle Alpha analyzed over 10,000 tweets since January 2014 that reer to Ryanair (when they launched new initiatives toimprove customer service, reduce charges and allow a second piece o carry-on luggage). Results indicated that sentiment

towards Ryanair had improved.

Other tools can be used to analyze search engine visibility. Tis graph shows how Ryanair has lost 25% o its Googlevisibility since the start o the year. Tis is caused by their ailure to migrate pages rom their old website when theycreated their new one. Data rom Hitwise suggest that Ryanair receives 20% o its internet traffic rom search engines.

Macro- Traders

Actionable Insights

A survey by OneMarketData showed that the consensus among investors currently is that the greatest benefits o socialmedia content are elt mostly in the ast moving equities and derivatives markets14. Te web is not only useul or equity

investors however- it can also be leveraged in global macro trading and investing strategies.News events breaking on the likes o witter have a similar value or macro traders as traders ocused on equity markets.In October 2013 news broke on witter that John Boehner had agreed to allow the Senate proposal on the debt ceiling topass. Te market reaction to the tweet was a 0.7% jump in the value o the Dow, equivalent to $30 billion in market value.

Source: Eagle Alpha


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Sourcing breaking news close to the source is also important, particularly during geopolitical conflicts. weets romUkraine Reporter in June 2014 about sightings o Russian tanks entering Ukraine and chatter about a ull scale invasionon Ukraine by the Russians were ollowed by a 50bps jump in crude oil.

Risk mitigationTe internet can also be leveraged as a risk mitigating tool by listening or news that might sway the global currency orbond markets. In July 2013 it was rumoured that the Portuguese Finance Minister wanted to resign rom his post, viawitter. It took traditional wires 10 minutes to pick up on this news which caused a subsequent spike in Portuguese 10-

Source: witter




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Year yields.

When our Egyptian Cabinet Ministers resigned in July 2013 the French Press Agency (AFP) broke the news first onwitter and again traditional wires were delayed picking up on it. Te tweet was the start o the troubles in Egypt duringJuly 2013.

Real-time Insights



With access to the entire witter firehose (via Eagle Alpha) it is possible to monitor trends or events o interest. Tese

searches provide real-time actionable intelligence. We see rom this diagram the volume o tweets containing the wordsUkraine and Russia together over the course o a week, rom 15th June to 21st June 2014. Te peak o tweet activityoccurred around midday on June 16th as the world became aware that Russia had cut off oil supplies to Ukraine. In theearly hours o the morning Ukraine Reporter had announced the news.

Macro- Portfolio Managers

Sina Weibo InsightsSina Weibo, the most popular social media website in China, is used by experts and economists to post insightulcommentary. Messages on this micro-blogging website are significantly longer than tweets so the content has the potentialto provide context as well as updates


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Te first example below shows Chinese economist, Ma Guangyuan, commenting on the Chinese housing market on Sina

Weibo. He believes that the market is showing signs o decline, and that preventing the housing market rom collapsingshould now become policymakers priority.

Liang Ruian, hedge und manager at PinPoint Fund, shares important insights relating to Iron ore. Te Data shows thatthe Chinese commodity is oversupplied and suggests a growing downward pressure on the iron ore price.

Predictive Modelling

Source: Eagle Alpha / Sina Weibo

Source: Money Matters blog

Recorded Future is a company that is scanning the Internetor predictive signals to spot events and trends early. Teirpredictive models can help anticipate risks so that investorscan capitalise on opportunities. For example, RecordedFuture analyse public web data and monitor tweets to predictgeopolitical disturbances. In May 2014 they blogged about

the likelihood o civil unrest ollowing Egypts Presidentialelection. Tey have also suggested that analysis o open sourceinormation indicates that social unrest will spread into thewestern region o Ukraine as Russia will seek to exert pressurehere to solidiy gains 15. Contact us i you would like anintroduction to Recorded Future.

Views o Expert Bloggers

Some o the most interesting macro insights online arecontained in blogs. Experts commenting on political events,government policies and economic developments will ofendo so in blog posts. Tere are hundreds o interesting people

providing insightul blog content.


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Francesco Papadia, the ex-Director or Market Operations at the European Central Bank, draws on his 40 years experienceto provide monetary policy development insights. He predicted very accurately the details o Mario Draghis LRO

announcements at the ECB Governing Council meetingon Tursday 5 June 2014 three days in advance o the meeting16.

Influential und managers, like Dan Alpert o Westwood Capitaland Shane Oliver o AMP Capital, blog and tweet regularly todiscuss macro developments, investment and risk in advancedand emerging economies.

Macro- Research Analysts

US inflation Insights

Research analysts can leverage Google search data in a similarway that central banks worldwide are doing, to complementmacro indicators. As consumer habits have developed andturned more towards the internet, search data has become arich data source that can make economic models more accurate.

o gauge trends the popularity o certain terms are analyzedover a number o years. For example, analysis o Google search

data since 2004 shows a significant correlation between thesearch terms more expensive (0.96), what is the cost (0.94),and U.S. CPI data. Tis data can thereore be monitored in realtime to track inflation.

US housing Insights

As well as providing inflationary insights, this unique data canbe used to iner uture purchasing decisions. When people arelooking to buy a car or a house, the web is now their first porto call rather than dealerships or estate agents like it was in the

Source: witter

Source: Eagle Alpha


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past.

Analysis o Google search data since 2004 shows a significant correlation between the search terms American mortgage

network (0.97), mortgage leads (0.97) and new home sales data in the US. Macro analysts interested in understandingbig picture influences in the marketplace would find leveraging this data very useul.

Baidu Index

Baidu, the most popular search engine in China, has a eature similar to Google rends called Baidu Index. It can be usedor monitoring search trends in China. Research analysts can leverage this data or China specific insights.

Below is a time series rom Baidu Index or Estate Agent (),which could

be used to calculate uture purchasing expectations or houses.

10 Examples o How the Buyside Will Leverage the Web

Tis is only the beginning or Wall Street leveraging the web. Te best advances are yetto come and it will be innovative buyside firms who will be leveraging the web in themost interesting ways.Some use cases:

1. Analysis o Foursquare Data to Predict Sales

Analyzing data rom location-based social networks, like Foursquare and their newly

launched Swarm app, which allow users to check-in at venues could provide very

Source: Baidu Index


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valuable insights.

By building geo-ences around the stores it would be

possible to chart trends regarding the number o peoplewalking into every Starbucks or Pret-a-Manger inManhattan. Various metrics could be measured over time;check-ins recorded each day, the most requent visitors,and even gender break downs. Check-in data related to acompanys stores as well as their competitors would offerunique insights and opportunities to orecast sales andperormance.

What is even more exciting is that Foursquare have plansto make this data even richer- with newly launched Swarm

app their goal is to introduce automatic check-ins. Ichecking-in is made passive this will even urther increasethe value o this data.

2. Create quantitative strategies based on thetop influencers on witter

Inormation is the lieblood o high-requency algorithmictrading and quantitative strategies. Rather than pluggingthe entire witter firehose into their systems, analysingthe top influencers on witter would yield better results.Instead o analysing content rom the 974,000,000twitter accounts, unds could ocus on the top 10,000identified influencers. Since November 2012 Eagle Alphahas leveraged algorithms and research analysts to identiythe top 10,000 stock market influencers on witter. FromJuly 2014 this inormation set is being made available toquant unds.

3. Monitoring geo-tagged tweets

Roughly 20 percent o tweets show users location, either

directly embedded in a geo-tagged tweet or rom usersinadvertently revealing their location. In theory thereore itis possible to monitor inormation coming rom a specificlocation to search or crucial insights directly at source.

Possible applications o this would be to listen to what isbeing said at a specific Exxon or BP oil rig or FacebookHQ. Tese applications would provide great insight intowhat employees are saying.

4. Analysis o Sina Weibo firehose data

Source: www.astcolabs.com


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Analysing data rom Sina Weibo, the dominant Chinesesocial media channel with 500 million registeredusers and 100m messages posted daily, could offer aunique opportunity or the buyside to understand thedemographics and interests o the worlds second biggestconsumer market. Gnip noted that the social data availableon Chinese platorms is a lot richer. You can get gender,location, and users are willing to share that inormation.Weibo is even able to provide education level. Access toSina Weibo data and firehose search will provide investorswith invaluable insights o a market with more than 1.6

billion consumers.

5. Leveraging blog content

Leveraging blog content is more difficult than inormationrom other social media eeds given how dispersed blogs areonline. Tere are hundreds o quality bloggers worldwidesharing their expertise and providing great insights onmacro topics but it is difficult to find and monitor the mostimportant sources.

In July 2012 Eagle Alpha will launch a new eature that will

leverage our technologies and research analysts to identiythe best blog content across the entire web, organise it intothem or regions and rate it. Contact us i you would like aree trial.

6. Image analytics

ext is not the only interesting content on the web to beanalysed. Images provide a rich and valuable source oinormation. Millions o images can be processed andanalysed or inormation o interest.

It is easible that using a combination o technologies; suchas acial recognition sofware and geo-location data, thatCEOs movements could be tracked through photos postedo them through social media channels.

7. Pharmaceutical industry insights

Tere is vast amounts o inormation available online

Source: houseodebt.org

Source: Practice Fusion


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relating to pharmaceuticals which could be leveraged or investmentdecisions. One website in particular aggregates data rom US GP

prescriptions or all drugs. From the data it generates real-time marketshares or all drugs across the US and tracks how market shares haveevolved over time.

In the treatment o type 2 diabetes we see that Januvia is the mostcommon drug prescribed, but we see highlighted the rapid penetrationo Invokana since its launch. Tis inormation is particularly interestingthereore or analysts monitoring drug trials or patent expirations.

Another website scrapes patients orms or drugs. Drugs used orthe same purpose are rated based on the data and inormation on the

patients top concerns is given.8. Pre-IPO report

Given that the web provides unique insights on companies, analyzing this inormation in the lead-up period to anIPO can reveal interesting inormation, particularly given the lack o inormation available on companies pre-IPO. Forexample, investors are be interested in reports that leverages online inormation ahead o the highly anticipated AlibabaGroup IPO. In early July Eagle Alpha will publish a 50 page pre-IPO report on Alibaba Group. Contact us i you wouldlike a copy.

9. Custom Research

A new company that is about to launch will specialize in customweb research. Using a wide range o licensed tools and sofware theweb can be leveraged to find insightul inormation and analysis.Research can be conducted on any topic; rom translation o the bestcommentary on Sino Weibo in H1 2014 regarding commodities, toanalysis o all employee commentary in H1 2014 regarding Netflix,or even emale sentiment in Manhattan during the two weeksollowing the launch o the next iPhone. Contact our CEO i youwould like an introduction to the company that will do custom

research. His email [email protected].

Smoother information flow from onlineinformation reduces market volatility

Te range and scope o inormation that can be leveraged or investment purposes is wider than most o Wall Streetrealize. What ideas do you have? Eagle Alpha are launching a competition to find the best ideas regarding how Wall Streetcan leverage the web. Te best idea submitted to Eagle Alpha beore July 31st 2014 will win a case o wine worth $1,000.Send submissions to: [email protected]

Source: BNY Mellon

Source: Eagle Alpha
http://www.eaglealpha.com/mailto:enquiries%40eaglealpha.com?subject=Enquiry%20from%20White%20Paperhttp://www.twitter.com/dollareaglehttp://www.eaglealpha.com/mailto:emmett.kilduff%40eaglealpha.com?subject=Request%20for%20Custom%20Research%20%28contact%20via%20Whitepaper%29mailto:emmett.kilduff%40eaglealpha.com?subject=Ideas%20entry%20%28via%20Whitepaper%29mailto:emmett.kilduff%40eaglealpha.com?subject=Ideas%20entry%20%28via%20Whitepaper%29mailto:emmett.kilduff%40eaglealpha.com?subject=Request%20for%20Custom%20Research%20%28contact%20via%20Whitepaper%29mailto:emmett.kilduff%40eaglealpha.com?subject=Email%20from%20Whitepaper%20-%20Alibaba%20IPO%20Requestmailto:emmett.kilduff%40eaglealpha.com?subject=Email%20from%20Whitepaper%20-%20Alibaba%20IPO%20Requesthttp://www.eaglealpha.com/http://www.twitter.com/dollareaglemailto:enquiries%40eaglealpha.com?subject=Enquiry%20from%20White%20Paperhttp://www.eaglealpha.com/


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10. Generate more precise real-time measures o macroeconomics and industry

As discussed, key economic announcements like housing and car sales can already be reasonably anticipated rom Googlesearch analysis. By choosing other appropriate economic drivers to analyse, greater economic, regional, national, andindustry segmentations should be possible. Tis inormation could be used to generate more precise real-time measureso macroeconomics (growth, inflation, trade) and industry, or even to develop aggregate international economic andfinancial statistics.

Tis could have a huge impact on global capital markets, risk and volatility. Bond markets may be less affected byinrequent inormation releases such as quarterly economic reports with a steady stream o higher quality inputs romdata. Economic releases such as GDP, inflation and industrial production may become more accurate and less surprisingthanks to advance signals rom data methods 17.

Te Eagle Alpha Solution


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Eagle Alpha curates the entire web or actionable intelligence to give to Wall Street.

Te company was ounded in 2012 by a ormer Morgan Stanley investment banker, Emmett Kilduff. o view a shortintroduction on CNBC, click here. Since 2012 we have built a world-class team o employees, investors and advisorypanel members that brings together experience rom companies including Barclays, Cairn Capital, Cantor, CQS, CreditSuisse, HSBC Asset Management, Jefferies, JP Morgan, Knight Capital, Macquarie, Markit, MergerMarket, MorganStanley, Oaktree and Schroders.

A key differentiator o Eagle Alpha is that we curate the entire web. While witter provides breaking news and insightsrom analysis o the 15 billion tweets each month, there are also great opportunities to find actionable insights elsewhereon the web. For example, we source intelligence rom hundreds o orums, thousands o blogs, millions o websites,LinkedIn, Facebook, Sina Weibo and encent Weibo.

Te buysides major challenge with web data remains identiying the signals rom the noise. Eagle Alphas two-step process

overcomes this:1. Eagle Alpha use a wide range o sophisticated technologies to filter and distribute the most relevant data or

clients specific needs. We leverage more than 25 technologies, between online tools, licensed sofware and

proprietary technology developed in house (like our algorithm that identifies the top influencers to ollow on

witter or any stock or topic).

2. echnology only eliminates some o the noise however. In order to ully eliminate noise we believe that human

judgment is required. Eagle Alpha currently employs 11 research analysts and all our senior analysts have buyside

and/or sellside experience.

Our research analysts publish three types o actionable inormation:

1. Market-moving inormation sourced predominately rom tweets and blogs.

2 Unique color like CEO, senior management, analyst and expert commentary rom the web that is

not ound on traditional sources or RNS.

3. Data-driven analytics insights on longer-term trends and themes. (e.g. analysis o 15 billion

tweets each month or insights on the US consumer).

All inormation is provided to clients in a compliant-riendly manner as the inormation is read-only and is stored or5+ years.

Our vision is to be the number one provider o actionable inormation rom the web to Wall Street. We completed an

angel round (click hereor New York imes article) in February 2014 and in September 2014 we will begin a large Series
http://www.eaglealpha.com/mailto:enquiries%40eaglealpha.com?subject=Enquiry%20from%20White%20Paperhttp://www.twitter.com/dollareaglehttp://www.eaglealpha.com/http://video.cnbc.com/gallery/%3Fvideo%3D3000279272%26play%3D1http://dealbook.nytimes.com/2014/02/27/start-up-that-analyzes-twitter-for-wall-street-raises-financing/%3F_php%3Dtrue%26_type%3Dblogs%26_r%3D0http://dealbook.nytimes.com/2014/02/27/start-up-that-analyzes-twitter-for-wall-street-raises-financing/%3F_php%3Dtrue%26_type%3Dblogs%26_r%3D0http://video.cnbc.com/gallery/%3Fvideo%3D3000279272%26play%3D1http://www.eaglealpha.com/http://www.twitter.com/dollareaglemailto:enquiries%40eaglealpha.com?subject=Enquiry%20from%20White%20Paperhttp://www.eaglealpha.com/


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Reerences

1IDC Digital University study

http://www.emc.com/collateral/analyst-reports/idc-extracting-value-rom-chaos-ar.pd

2Gnip White Paper: Social Media in Financial markets: Te Comingo Age

http://gnip.com/docs/social-media-and-markets-the-coming-o-age.pd

3

SEC Says Social Media OK or Company Announcements i Investorsare alerted.

http://www.sec.gov/News/PressRelease/Detail/PressRelease/1365171513574#.U6hAPRDscQ

4Business Insider: witter Just Crushed Wall Street afer the CyprusBailout

http://www.businessinsider.com.au/twitter-beats-the-sell-side-afer-cyprus-bailout-2013-3

5Kit Juckes personal blog; brevity is the soul o wit how witter

changes research

http://mardlecapital.blogspot.ie/2013/03/brevity-is-soul-o-wit-how-twitter.html

6 Ben Edelman personal blog, Te Darker Side o Blinkx

http://mardlecapital.blogspot.ie/2013/03/brevity-is-soul-o-wit-how-twitter.html

7 Search Engine Land, Expedia Lost 25% o their Search Visibility inGoogle Possibly over Unnatural Links

http://searchengineland.com/expedia-loses-25-o-their-search-visibility-in-google-possibly-over-unnatural-links-182113

8Bloomberg Businessweek, How Many HF Firms Actually Usewitter to rade?

http://www.businessweek.com/articles/2013-04-24/how-many-hf-firms-actually-use-twitter-to-trade

9Brunswick Review, 2014 Brunswick Investor Use o Digital and SocialMedia Survey,

http://www.brunswickgroup.com/publications/surveys/2014-brunswick-investor-use-o-digital-and-social-media-survey/

10Zero Hedge, Worlds Largest Hedge Fund Uses witter For Real-ime Economic Modeling

http://www.zerohedge.com/news/2013-12-12/worlds-largest-hedge-und-uses-twitter-real-time

11Brynjolsson, Eric and Wu, Lynn, Te Future o Prediction: HowGoogle Searches Foreshadow Housing Prices and Quantities

http://aisel.aisnet.org/icis2009/147/

12

Bloomberg, Your 119 Billion Google Searches Now a Central Bankool

http://www.bloomberg.com/news/2012-08-02/your-119-billion-google-searches-now-a-central-bank-tool.html

13 Te elegraph, Investment analysts are stuck in a rut, witter canpull us out

http://www.telegraph.co.uk/finance/comment/9217851/Investment-analysts-are-stuck-in-a-rut-witter-can-pull-us-out.html

14 OneMarketData Survey: Understanding the Influence o SocialMedia on Financial Markets

http://www.onetick.com/web1/webinars/Social_Media_Survey.php?code=gEm50combS&id=a2d60e2-53d-91b4-e1e3-9d77c01a159

15 Recorded Future blog: Updates: Putting Unrest in Ukraines West inPerspective

https://www.recordeduture.com/ukraine-orecast/

16 Francesco Papadia personal blog, Money Matters,

www.moneymatters-monetarypolicy.blogspot.com

17 BNY Mellon; A First Perspective: Te ransormational Influence oBig Data on the 21st Century Global Financial System

http://us.bnymellonam.com/core/library/documents/knowledge/Viewpoints/sBig_Data.pd
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vity-is-soul-of-wit-how-twitter.html%0Dhttp://mardlecapital.blogspot.ie/2013/03/brevity-is-soul-of-wit-how-twitter.html%0Dhttp://www.businessinsider.com.au/twitter-beats-the-sell-side-after-cyprus-bailout-2013-3%0Dhttp://www.businessinsider.com.au/twitter-beats-the-sell-side-after-cyprus-bailout-2013-3%0Dhttp://www.sec.gov/News/PressRelease/Detail/PressRelease/1365171513574%23.U6hAfPRDscQhttp://www.sec.gov/News/PressRelease/Detail/PressRelease/1365171513574%23.U6hAfPRDscQhttp://gnip.com/docs/social-media-and-markets-the-coming-of-age.pdf%0Dhttp://gnip.com/docs/social-media-and-markets-the-coming-of-age.pdf%0Dhttp://www.emc.com/collateral/analyst-reports/idc-extracting-value-from-chaos-ar.pdfhttp://www.emc.com/collateral/analyst-reports/idc-extracting-value-from-chaos-ar.pdfhttp://www.eaglealpha.com/http://www.twitter.com/dollareaglemailto:enquiries%40eaglealpha.com?subject=Enquiry%20from%20White%20Paperhttp://www.eaglealpha.com/

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