Peering Thru Time, the Value of Deep History

One of the most profound discoveries of the 20th century was the realization that the size and depth of the universe stretched far beyond our own Milky Way Galaxy. Conventional wisdom leading up to Edwin Hubble’s discovery was that the universe was confined to the spiral galaxy known since the days of Galileo. Edwin, using the world’s largest telescope of his day was able to peer into the deep recesses of space and time. What was once just thought of as nebulae were in fact whole other distant galaxies, a discovery that consequently changed the view of the universe on a fundamental level. It wasn’t until the 1990’s when the Hubble Telescope allowed astronomers to peer deep into space and time itself that far off galaxies became common everyday theatre. We are witnesses to an expansive and deep history which we take for granted yet I am continually awed by the spectacle of such things.

In the business world obtaining clarity and understanding of deep history can simply be a revelation. Data is a powerful tool for the execution of business operations, averting risk and planning for the future.  Recently on CNBC Squawk Box, Jay Fishman CEO of Traveler’s Insurance talked about a Treasure Trove of Data.  How they use information from their one million business accounts as a critical element in pricing insurance. They maintain an expansive history of this data over many years allowing them to observe trends and cycles inclusive of the deeply negative hit of the financial crisis of 2008.  Jay described their analysis of this wealth of information and showed the correlation to the overall economy and the impact to their own planning cycles.

For quantitative traders and portfolio managers deep history can be an ally for planning, simulation, valuation, benchmarking and numerous other critical decisions. It is the fodder of global market research.   Deep history goes beyond the notion of tick-by-tick data. While that is a crucial element in quant research, those involved in managing large multi-asset portfolios or complex quant strategies already understand deep history is inclusive of daily prices, company fundamentals, earnings and corporate actions across a global symbology.

The worldwide market structure is inclusive of a broad network of global exchanges, OTC markets and clearing houses. It is a daunting challenge to navigate the labyrinth of diverse ticker symbols, CUSIP, ISIN and SEDOL identifiers requiring the need to weave a fabric of continuity linking them all together. But within lays greater sophistication for quantitative research, allowing unparalleled accuracy in beta analysis for portfolios and individual assets, indications for market volatility. Portfolio performance and accurate fair value mark to market valuation can be accomplished quickly and efficiently to assess and reduce risk exposure. These are just a few of the many uses of deep, global yet ever expanding historical data.

Just as the galaxies are constantly evolving, growing and shrinking so do the companies behind the equities markets as they issue dividends, split stocks, change their ticker name and other impactful corporate actions. These adjustments can impact price and/or volumes and when used for return calculations, can have a huge influence on the accuracy of portfolio simulations and strategy backtesting.

Deep history is a key ingredient representing opportunity. Like the heavens above, it is readily available in all its raw glory but all too often just out of comprehensible reach.  The Hubble Telescope became the tool of astronomers that opened up the heavens allowing a new comprehension of the timeless universe.  Deep history of daily pricing, reference data and fundamentals demand equally effective tools so researchers, portfolio and asset managers can peer through a timeless lens from the past to the present.

Once again thanks for reading.
Louis Lovas

For an occasional opinion or commentary on technology in Capital Markets you can follow me on  twitter, here.

About Louis Lovas

Director of Solutions, OneMarketData, with over 20 years of experience in developing cutting edge solutions and a leading voice in technology and trends in the Capital Markets industry.
This entry was posted in Algorithmic Trading, Analytics, Complex Event Processing, Equities, Foreign Exchange, Futures and Options, High Frequency Trading, OneMarketData, OneTick, Tick database. Bookmark the permalink.

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