Model beats Wall Street analysts in forecasting business financials
Knowing a company’s true sales can help determine its value. Investors, for instance, often employ financial analysts to predict a company’s upcoming earnings using various public data, computational tools, and their own intuition. Now MIT researchers have developed an automated model that significantly outperforms humans in predicting business sales using very limited, “noisy” data. In finance, there’s growing interest in using imprecise but frequently generated consumer data — called “alternative data” — to help predict a company’s earnings for trading and investment purposes. Alternative data can comprise credit card purchases, location data from smartphones, or even satellite images showing how many cars are parked in a retailer’s lot. Combining alternative data with more traditional but infrequent ground-truth financial data — such as quarterly earnings, press releases, and stock prices — can paint a clearer picture of a company’s financial health on even a daily or weekly basis. But, so far, it’s been very...