Alternative Data:

Applications & Case Studies

Version 2
(8th September 2017)

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Table of Contents

1. Introduction………………………………………………………………..Page 4

2. Is There Alpha In Alternative Data?..................................................Page 7

3. Applications…………………………………………………………….....Page 9

3.1 Introduction …………………………………………………………..Page 9

3.2 Applications by Category of Alternative Data…………………..Page 10

3.3 Applications by Asset Class…………………………………….....Page 15

3.4 Applications by Type of Asset Management Firm……………..Page 19

4. 20 Case Studies…………………………………………………………..Page 25

5. Overview of Eagle Alpha……………………………………………......Page 75

6. Eagle Alpha’s Data Sourcing Solution……………………………… .Page 77

7. The BIG Alternative Data Showcase Event………………………….Page 80

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List of Figures

FIGURE 1: ALTERNATIVE DATA ADOPTION ................................................................................................................................ 4

FIGURE 2: ALTERNATIVE DATA TO DRIVE ACTIVE MANAGER PROFITS ...................................................................................... 5
FIGURE 3: BENEFITS OF INTEGRATING ALTERNATIVE DATA INTO AN INVESTMENT PROCESS .................................................... 9
FIGURE 4: EAGLE ALPHA’S 24 CATEGORIES OF ALTERNATIVE DATA ...................................................................................... 10
FIGURE 5: RESULTS OF THE BARCLAYS SURVEY REGARDING ALTERNATIVE DATA ................................................................. 21
FIGURE 6: JOBS ACTIVE PORTFOLIO RETURNS ....................................................................................................................... 28
FIGURE 7: SHARPE RATIOS OF VARIOUS STRATEGIES USING DOLLAR SPEND, BUYER COUNT AND ORDER COUNT ................ 30
FIGURE 8: PERFORMANCE OF LEVEL (LEFT) AND TIME-SERIES Z-SCORE OF CHANGES (RIGHT) AS TRADING SIGNALS .............. 30
FIGURE 9: EAGLE ALPHA’S MODEL PREDICTED STRONGER THAN EXPECTED RESULTS ......................................................... 32
FIGURE 10: EAGLE ALPHA MODEL PREDICTED JUNE QUARTER UPSIDE FOR PAYPAL............................................................ 34
FIGURE 11: EAGLE ALPHA MODEL PREDICTED JUNE QUARTER DOWNSIDE FOR STARBUCKS ................................................ 36
FIGURE 12: SEARCH DATA SUGGESTED STAGNANT QUARTERLY GROWTH ............................................................................ 36
FIGURE 13: REPORTED NUMBERS V ESTIMATES V EA PREDICTION ....................................................................................... 38
FIGURE 14: GREAT W ALL REVENUE PREDICTION .................................................................................................................... 38
FIGURE 15: GREAT W ALL MOTORS REVENUE GROWTH VS CAI DEALERSHIP DATA .............................................................. 39
FIGURE 16: SEARCH SIGNAL INDEX FOR FINL ....................................................................................................................... 41
FIGURE 17: DKS CUMULATIVE YOY% CHANGE IN CAR COUNTS ........................................................................................... 42
FIGURE 18: W EAKNESS IN THE RANKING OF BESTSELLING CAMERAS ..................................................................................... 44
FIGURE 19: SPLIT OF BESTSELLERS BY PRICE SEGMENT ........................................................................................................ 44
FIGURE 20: THE MAVIC GAINED EDGE ON THE KARMA ........................................................................................................... 45
FIGURE 21: INDEXED SHARE PRICE PERFORMANCE ................................................................................................................ 46
FIGURE 22: ONLINE DATA SHOWED FITBIT’S IMPROVING SHARE TRENDS .............................................................................. 48
FIGURE 23: FITBIT CONSOLIDATED TOP RANKING IN FITNESS W ATCHES IN Q2 ..................................................................... 48
FIGURE 24: METRICS FOR SELLERS IMPROVING ...................................................................................................................... 50
FIGURE 25: UNIQUE SELLER INDEX ......................................................................................................................................... 51
FIGURE 26: BURBERRY SAME STORE SALES VS EAGLE ALPHA STOCK INDEX ........................................................................ 53
FIGURE 27: BURBERRY'S SAME STORE SALES SURPRISE VS SHARE PRICE ........................................................................... 54
FIGURE 28: BIG 3 GLOBAL BRANDS IN DECLINE THROUGH 2016 ........................................................................................... 56
FIGURE 29: SHOE INDEX TURNS NEGATIVE IN EARLY 2017 .................................................................................................... 57
FIGURE 30: FOOT LOCKER TRENDS LEADING SSS DECLINE .................................................................................................. 57
FIGURE 31: UNDER ARMOUR TRENDS IN STEEP DECLINE ....................................................................................................... 58
FIGURE 32: HBO MOBILE APP PEAK NEW INSTALLS (UNITED STATES) ................................................................................. 59
FIGURE 33: OVERWATCH TWITTER VISIBILITY MUCH STRONGER THAN COMP TITLES ............................................................ 61
FIGURE 34: OVERWATCH LEADS ON TWITTER SENTIMENT FOR FIRST W EEK.......................................................................... 62
FIGURE 35: SEARCH SIGNAL INDEX FOR LULU ....................................................................................................................... 64
FIGURE 36: LULULEMON SHARE OF MENTIONS ACROSS BLOGS AND FORUMS ....................................................................... 64
FIGURE 37: LULULEMON PRICE GROWTH ACCELERATED ........................................................................................................ 65
FIGURE 38: EA US UNEMPLOYMENT INDEX VS. UNEMPLOYMENT RATE (US) ........................................................................ 67
FIGURE 39: CHINA’S TRADE BALANCE ..................................................................................................................................... 69
FIGURE 40:MONTHS FROM LISTING TO COMPLETION .............................................................................................................. 71
FIGURE 41: DISCOUNT FROM LAST ASKING PRICE .................................................................................................................. 71
FIGURE 42: DISCOUNT FROM LAST ASKING PRICE BY BUYER TYPE ........................................................................................ 72
FIGURE 43: MONTHLY AVERAGE CREDIT SCORES .................................................................................................................. 74
FIGURE 44: SUMMARY INFORMATION ....................................................................................................................................... 76
FIGURE 45: THE BIG ALTERNATIVE DATA SHOWCASE EVENT ................................................................................................ 80

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Section 1: Introduction

Like expert networks in the late 1990s, alternative data may revolutionize the investment
process. This is evidenced by a JPMorgan survey of 237 investors at its quant conference
in May 2017. It asked "what is your opinion of big data / machine learning"? 22% of
respondents said "Revolution - will lead to rapid changes to investment landscape" and
70% of respondents said "Evolution - it's importance will gradually grow for all investors".

Alternative data is not new. 50+ innovative asset management firms have been working
with alternative data for several years. These firms are primarily the larger quantitative or
'quantamental' firms. Jefferies, in its June 2017 white paper, stated that 20% of hedge
funds with over $1bn in AUM have a person dedicated to alternative data or a person is
spending 50% of their time on alternative data. In our opinion, there are currently 150-200
firms in the early adoption phase – see Figure 1.

Adoption is increasing rapidly in 2017. At the beginning of 2017, Eagle Alpha had dialogue
with approximately 125 firms. As of September 2017 the number is 226 and increasing
rapidly. In our opinion asset managers will ‘cross the chasm’ of Alternative Data Adoption
by the end of 2018 – see Figure 1.

Figure 1: Alternative Data Adoption

Source: Geoffrey Moore ‘Crossing the Chasm’, Eagle Alpha

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A reason for the increased adoption is that active managers are realising that they have
to innovate in order to protect (or increase) their profit margin. As Quinlan & Associates 1
stated "given ongoing revenue and cost headwinds, we see active managers who
continue to operate under traditional business models stand to see their profit margins
compressed from an industry average of 40% at present to 25% by 2022”. See Figure 2.

Figure 2: Alternative Data to Drive Active Manager Profits

Source: Quinlan & Associates

Firms that are still not on the adoption curve ("on the fence") constantly ask Eagle Alpha
how alternative data can be applied to their investment process. The goal of this report is
to answer that question based on our five years of experience in the alternative data space
and by aggregating insightful content from third parties e.g. investment banks and data
vendors. This report is the second of a series of reports published by Eagle Alpha which
outline alternative data applications and case studies. We welcome all comments,
suggestions and ideas to improve the next version of these reports.

1 Source: ‘Alternative Alpha: Unlocking Hidden Value in the Everyday’, September 2017

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In Section 2 we address a question which we are commonly asked: is there any alpha in
alternative datasets?

In Section 3 we outline applications for:

• Each of the 24 categories of alternative data.

• Equity, macro and credit asset classes.

• Quantitative funds, discretionary hedge funds and traditional mutual funds.

In Section 4 we provide 20 case studies. Each case study is classified by asset class,
alternative data category and type of asset manager.

In Section 5 we provide a brief overview of Eagle Alpha.

In Section 6 we discuss how asset managers source datasets and outline how Eagle
Alpha can help.

In Section 7 we detail our upcoming event that will showcase 50 of the highest quality
datasets that we are aware of today.

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Section 2: Is There Alpha In Alternative Data?

Despite alternative data being in its infancy, we find clients already asking us about the
erosion of alpha in these datasets and we wish to address this briefly.

One example of alpha erosion that is often cited is the use of credit card data to predict
quarterly revenues. However, analysis of quarterly results for S&P 500 retailers doesn’t
support this assertion. The average error for consensus estimates on these retail stocks,
although still low at 1.5% over the four quarters to Q2 2017, has actually increased slightly
in recent times and was above the five-year average of 1.4% in Q2 2017. Likewise, the
average one day stock move on the day of earnings results has been increasing. The
average earning-announcements-day move was 6.9% in the four quarters to Q2 2017
compared to an average of 5.7% in the preceding five years. We see no evidence that the
increased use of credit card data to predict retail revenues in the US is eroding the alpha
opportunity around quarterly revenues.

The assertion that the alpha in alternative data is being eroded also fails to recognize the
fact that everyone has a different definition of alpha, depending on their investment
horizon and investment style. Quantitative funds might use consumer transaction data to
build a trading strategy across over 100 stocks, a discretionary hedge fund could use the
same data to make calls on a small number of stocks around earnings. A mutual fund
could use the same consumer transaction to better understand the fundamentals and
competitive dynamics in a sub-sector, analyzing factors such as average basket size,
frequency of shopping and customer switching.

There are a number of reasons why we believe the alpha opportunities in alternative data
are at the very early stage of being realized:

Current adoption lags traditional datasets

• Alpha is still being found in traditional datasets, such as price data, despite being much
more widely available and used than non-traditional datasets!

• Today only a small number (150) of asset management firms worldwide are working with
alternative data. It will be a few years before thousands of asset management firms are
working with alternative data and usage becomes widespread.

• Of these 150 firms, only a small percentage have licensed more than 30 datasets. Today
there are 515 datasets in Eagle Alpha's database.

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Alternative datasets are richer than traditional datasets

• Some datasets are very deep, involving hundreds of variables and dimensions.
Because of this depth, advanced data science knowledge can provide an informational
edge.

• The amount of new alternative data is increasing. In the future, there will be thousands
of alternative datasets spread across categories, asset classes and geographies.
Existing datasets are constantly adding enhancements and coverage. More data results
in more opportunities for information extraction.

• Increasing complexity of algorithms allows for better extraction of patterns from

previously unusable, unstructured data, such as text and imagery.

Barriers to entry are higher for alternative datasets

• Alternative datasets have a higher technological and statistical requirements for

extracting alpha. Differences in the ability to extract and interpret information from
alternative data sources will result in inefficient discounting of new information. Asset
managers staffed with individuals well versed in statistical concepts will have a better
prospect of identifying alpha in the data. Differentiation in data providers’ capabilities will
result in alpha generating opportunities as some sources will provide signals that are
more accurate than others.

• Many firms work with raw data as opposed to partially pre-processed data data so that
proprietary data processing practices and algorithms can be applied to alternative
datasets.

• Multiple datasets may be required to answer a single question, giving an advantage to

companies that hold multiple datasets and have an efficient way to manage and merge
the datasets.

• Alternative datasets can be more expensive than traditional datasets, presenting

another entry barrier to smaller investment firms.

Finally, for discretionary investors, data is only as valuable as the questions asked of it.
Investors who have unique angles in their fundamental analysis will seek answers to
questions that other investors have not thought of asking. For example, web crawled data
may be aggregated and analyzed with the intention of understanding barriers to entry for
certain services and products.

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Section 3: Applications

Section 3.1: Introduction

In this section we outline the benefits of using alternative data, applications relevant to
different categories of alternative data, asset classes (equity, macro and credit) and types
of asset managers (quantitative funds, discretionary hedge funds and traditional mutual
funds).

Quinlan & Associates2 published a good summary of the benefits of integrating alternative
data into an investment process. They identify five benefits: 1) greater volume of data and
information; 2) unforseen insight; 3) competitive edge; 4) fiduciary duty; and 5) efficiency.
See Figure 3 below.

Figure 3: Benefits of Integrating Alternative Data into An Investment Process

Source: Quinlan & Associates

2 Source: ‘Alternative Alpha: Unlocking Hidden Value in the Everyday’, September 2017

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Section 3.2: Applications by Category of Alternative Data

Eagle Alpha created the first taxonomy for alternative data. This taxonomy has 24
categories – see Figure 4. The most common categories, based on our dialogue and
analytics, include consumer transaction, geo-location, satellite and sentiment. Today there
are 515 datasets in our database.

Access to detailed profiles on these datasets and insights into the most (and least)
common datasets, based on our dialogue and analytics, are available to clients of Eagle
Alpha’s Data Sourcing solution (see Section 6).

Figure 4: Eagle Alpha’s 24 Categories of Alternative Data

Source: Eagle Alpha

Below we highlight a number of examples of applications for each of the 24 categories of

alternative data. These examples are based on our discussion with asset managers since
2012.

1. Advertising: advertising data can be used to track category popularity e.g. luxury
products and financial products such as mortgages, automobiles, cybersecurity etc.
Advertising data exchanges have data on consumer interests over time based on their
internet browsing habits. Very few investors have worked with this data and its predictive
potential is largely unexplored. Data aggregators track corporate advertising spending on
various platforms and by campaign.

2. App Usage & Web Traffic: mobile app usage can indicate the level of product adoption.
Mobile banking, smart home devices, and restaurant apps are just a few of the potential
use cases. Trends in mobile app reviews can help investors evaluate product success.
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Country specific data can provide insights into product adoption internationally. Investors
can also track services embedded in apps such as payment providers and advertising
services. Web browsing traffic, both online and mobile, can be used to estimate company
revenues, particularly if the web pages providing purchase confirmations are tracked.

Please refer to the case study #14 on page 59.

3. B2B: a variety of data aggregators offer datasets about enterprise products and B2B
commerce. Some of these datasets are relevant for a range of industries, such as ones
that monitor enterprise level internet browsing activity, Alibaba’s B2B trade index and
enterprise survey providers. Other datasets provide niche information, such as databases
of industrial materials and databases of oil contracts and drilling concessions.

4. Business Insights: certain datasets can provide unique insights into corporate activity.
For example, by monitoring changes on corporate websites, new or discontinued services
and mid-level management changes can be tracked. Other datasets provide insights into
corporate credit quality. Datasets that detail acquisitions and startups at the industry and
sub-industry level can yield insights into industry dynamics.

5. Consumer Credit: marketplace lending data is frequently updated daily, showing

amount of loan issuance, loan pricing, borrower credit quality and defaults levels. Other
data providers track consumer credit quality overall in specific countries. This data, which
is typically more timely than other sources, can be used for determining momentum and
inflection points in the consumer credit cycle.

6. Consumer Transactions: this data can come from a variety of sources and can provide
merchant level transaction data (e.g. retailer, airline, service provider), product level
purchase data (e.g. beverages and automobiles) and macro level data. Some data
sources, such as credit card transaction data, represent a large user base. Other data
sources involve smaller panels, such as 2% of consumers, yet still provide reliable signals.

Consumer transaction data is frequently used to indicate quarterly revenue growth as the
data is available before quarterly corporate earnings are released. However, as noted in
Section 2, consumer transaction data can also be used by long-term investors e.g. to
evaluate online/offline shopping habits, product success, brand stability, stage of product
adoption, demographics of customer base, and the temporal impacts of promotional
campaigns. In addition, payment processing data, such as usage of PayPal and Square,
is frequently identifiable in consumer transaction data.

In October 2017 Eagle Alpha will release its first (quasi) proprietary consumer transaction
dataset. It is based on credit card data of a data partner.

Please refer to case studies #2 (page 29), #3 (page 31), #4 (page 33), #5 (page 35) and
#11 (page 49).

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7. Data Aggregators: technological innovation has allowed aggregators to collect data
from disparate sources, and aggregate that data in a format that is helpful for asset
managers. Aggregators may mine the deep web or carry out timely analysis of government
filings and releases. Other aggregators operate exchanges, or platforms, where datasets
may be purchased.

8. Employment: listings of job postings can be used to evaluate corporate strategy and
direction, industry growth rates, and demand for specific skills. For example, is the
demand for candidates with experience in Tableau, or Google AdWords, growing or
plateauing? Another example of an application would involve examining which countries
enterprise software companies are hiring business development personnel for.

Please refer to case study #1 (page 27).

9. ESG: alternative data sources can provide insights into the environmental, social and
governance (ESG) standards at a company. ESG criteria may be monitored via a variety
of data categories, including social media, satellite, open and public data. Additionally,
sources which monitor business complaints, business reputation, employee
compensation and hiring trends can also be useful resources.

10. Event Detection: alerts to breaking news from major news wires or social media
sources allow traders to react before news is fully discounted in asset prices. Other events
monitored include government filings, weather and changes in residence.

11. Expert Views: topic and sentiment trends among experts in any industry, or field of
expertise, can differ substantially from the trends observed in the general population and
in news feeds. Eagle Alpha’s proprietary algorithm can identify experts on Twitter, which
enable asset managers to collect and analyze their commentary. Groups of experts may
be large and cover common topics, such as international trade policy. Or, groups may be
niche in nature, such as experts whose focus is hearing aids or drone technology.

12. Geo-location: location data derived from mobile devices can yield timely information
on visitation trends. Common industry applications include retailers, restaurants, hotels,
travel, transportation and REITs. In addition to observing the level of growth in foot traffic,
this data can be used to identify the impact of promotions and weather events. Cross
brand loyalty and regional idiosyncrasies may be identifiable. Geo-location data providers
receive location data from mobile app owners, bluetooth beacons and sensors.

13. Internet of Things (IoT): while connected devices will eventually be able to provide
data that allows asset managers to better understand consumer and business activity, the
near-term opportunities lie in understanding which companies will benefit from IoT.
Suppliers to the IoT industry and companies leveraging IoT in the course of their business
both stand to gain economic benefits. Data which tracks the digital footprint of IoT activity
can provide indications of specific product adoption and overall market growth. As a

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nascent category, there are relatively few data providers, but IoT market development is
likely to result in increased data availability.

14. Online Search: numerous academic studies have been published establishing that
data regarding the volume of online searches can be used as an indicator of economic
activity, as well as an indicator of consumer interest in a product or topic. Furthermore,
these studies show that the best indicators are generally built with data from a basket of
terms as opposed to a single term or a small number of terms. Complex data science
techniques are used to determine the most indicative search terms and the most effective
model for combining those terms into an indicator. Online search data has several years
of history, is available in a timely fashion and is notably broad in its topic coverage.

Please refer to case studies #5 (page 35), #7 (page 40), #12 (page 52), #13 (page 55),
#16 (page 63) and #17 (page 66).

15. Open Data: Open Charge Map API allows users to access data on specific topics
such as locations of electric vehicle charging stations globally. The Wayback Machine
provides a historical archive of internet pages which may be useful when backfilling data
for a web crawling program. The GDELT Project provides a platform that monitors the
world's news media from nearly every corner of every country in print, broadcast, and web
formats, in over 100 languages, every moment of every day and provides a historical
archive of news media content.

16. Pricing: aggregated pricing data of goods and services for both businesses and
consumers is now more readily available than it has been in the past. This data can
provide insights into corporate revenues and industry dynamics. Alternative measures of
inflation have been developed using web crawled pricing data. This category also includes
real estate sales, leases and rentals.

17. Public Sector: government agencies publish large datasets that can be used gauge
both social and economic activity as well as the impact of regulation on the market. For
example, the Consumer Finance Protection Bureau (CFPB) provides access to its
database of customer complaints relating to financial services companies. TED (Tenders
Electronic Daily), a supplement to the Official Journal of the EU, publishes 460,000 calls
for tenders per year, for about 420 billion euro of value.

18. Reviews & Ratings: product and service reviews posted online can be harvested and
analyzed for ratings trends and frequently mentioned topics. Numerous academic studies
have shown that consumers place credence in online reviews and that favorable reviews
generally lead to increased sales. At the same time, excessive reviews and complaints
can be signs of poor management. App reviews can provide insights into consumer
satisfaction with app services such as mobile banking. Other data providers track brand
reputations by incorporating a variety of sources that gauge consumer and B2B opinions.

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19. Satellite: the interpretation of satellite images into data or intelligence is useful to asset
managers on many fronts e.g. general economic activity, agriculture, mining, construction
and real estate, shipping, oil & gas, project monitoring and retail.

Please refer to case study #8 (page 42).

20. Sentiment: scoring of news feeds and social media posts by sentiment and novelty is
a popular data source, especially for quantitative funds. Sentiment scoring may be applied
to investor commentary, consumer attitudes toward products and brands, or mainstream
news feeds. Sentiment data providers, in addition to mapping articles to entities such as
government agencies and publicly traded companies, may provide a number of additional
scores. Examples include novelty, relevance, price impact estimate, and momentum. Data
can be applied to factor models or used ad hoc in momentum and contrarian trading
strategies.

21. Social Media: clients of Eagle Alpha typically leverage social media data for analyzing
consumer trends, reception of product launches, brand popularity, customer satisfaction,
corporate/customer engagement, and technology usage (social media platforms owned
by publicly traded companies).

Please refer to case studies #15 (page 61) and #16 (page 63).

22. Store Locations: tracking store locations can yield insights into corporate growth and
strategy, particularly when store hours and promotions are also tracked.

23. Trade: macro firms leverage new alternative trade datasets for balance of payment
estimates, insights into major commodity markets, indications of national competitive
advantages and indications of consumer strength. Stock focused strategies use trade data
to gauge sales of companies whose products can be linked to imports/exports of specific
goods, fundamental analysis of transportation stocks and to analyze supply chains.

Please refer to case study #18 (page 68).

24. Web Crawled: crawling projects are frequently used to track website changes, e-
commerce activity (prices, product listings, promotions, reviews), public commentary and
government filings.

Please refer to case studies #6 (page 37), #9 (page 43), #10 (page 47), #16 (page 63),
#19 (page 70).

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Section 3.3: Applications by Asset Class

In this section we outline examples of applications for the equity, macro and credit asset
classes.

Equity

Equity investors are the biggest users of alterative data. Whilst the consumer and
technology sectors are the most common there are alternative datasets available for every
sector. Below we highlight examples of applications across 11 sectors and also disclose
the number of datasets within each sector based on our current database.

1. Consumer Discretionary (147 datasets): consumer transaction data can provide near
real-time insight, and longer-term trends, into spending at retailers and on specific
products. Online search data has proven valuable at identifying inflection points in
consumer interest in a product or service. In October 2017 Eagle Alpha will release our
first (quasi) proprietary consumer transaction dataset. It is based on credit card data of a
data partner.

2. Consumer Staples (87 datasets): sentiment data can provide a perspective on brand
performance.

3. Energy (35 datasets): satellite imagery and export data can provide insight into both
demand and supply over both the short and long-term.

4. Financials (61 datasets): growth in peer-to-peer lenders and other non-traditional

lending channels has created a wealth of data to better understand the health of consumer
credit and take the temperature of the lending market.

5. Health Care (50 datasets): employment data can provide an insight into company
strategy or success of trials through hiring trends.

6. Industrials (66 datasets): trade data enables analysts to track industrial company
shipments thus providing an insight into growth dynamics for the business.

7. Information Technology (60 datasets): analysts can track the supply chain of major
technology companies as well as the shipment of finished products.

8. Materials (37 datasets): vehicle tracking can provide real-time information on

commodity flows and supply and demand imbalances.

9. Real Estate (31 datasets): using geo-location data it is possible to track footfall to major
shopping malls.

10. Telecommunciation Services (20 datasets): app data providers can provide
important insight into phone activations and consumer behavior.

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11. Utilities (26 datasets): Some data vendors deliver real-time statistics on supply and
demand of electricity.

For detailed equity case studies please refer to Section 4 (case studies #1-16 on pages
27-63).

Macro

Wells Fargo3, in a paper in April 2017, gave a good high level summary of applications
related to macro: “Big data could help analysts solve many modern-day puzzles, such as
productivity growth and its living standard relationship, micro-foundations of
macroeconomic models, consumer/firm/investor behaviour and many more. In addition,
big data would help include what is often the missing link of demographics in many
economic/financial theories such as the consumption function. For instance, the current
consumption function employed to analyze consumers’ behavior estimates an average
behavior that does not distinguish consumers’ behavior by demographic or geographic
region. Another potential utilization of big data would be to improve current methods to
estimate the state of the overall economy as well as different sectors’ / regions’
performances. For the financial world, big data would increase opportunities for profits and
help manage risk more efficiently by incorporating broader information in risk modeling”.

Below we highlight examples of more specific applications across 8 types of macro data
and also disclose the number of datasets within each macro category (based on our
current database).

1. Commodities (46 datasets): in 2016 Cargometrics (a shipping data vendor) was so

successful that it turned itself into a hedge fund. In August 2017 Maersk invested in
Cargometrics. There are several similar datasets that can be used by commodity investors
e.g. a dataset to analyze the activity of Chinese ports.

2. Current Account (47 datasets): one of Eagle Alpha’s data partners provides a Trade
Nowcasting dataset that gives estimates of imports and exports for over 10 countries
including China and Brazil.

3. Financial Instruments (45 datasets): trade nowcasting datasets can be used by

investors for a variety of purposes e.g. foreign exchange.

4. Housing & Real Estate (66 datasets): the Bank of England uses an online listing
dataset that analyzes 80% UK housing sales. This dataset is more timely than publicly
available sources. Use cases include: analyze property deal flow and volume, track the

3Source: ‘Big Data Applications in the Economics/Financial World Part I: Opportunities and Challenges’, April
2017

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liquidity of the property market, track the liquidity and availability of secure consumer
credit.

5. Inflation (49 datasets): MIT’s Billion Prices Project (“BPP”) collects prices from
hundreds of retailers to construct an inflation index. BPP suggests that its index is a good
measure for predicting the overall U.S. inflation rate.

6. Labor Market (40 datasets): one of our most popular datasets provides timely and
granular data regarding the labor market, particularly the U.S. labor market. The dataset
has 8 years of history, is mapped to thousands of tickers, is updated daily and can by
analyzed at various levels e.g. state or sector.

7. Personal/Household Sector (53 datasets): consumer transaction data is used to

forecast private consumption. For example, there are credit and debit card datasets
available at an aggregated region/sector level for the US or China.

8. Surveys/Cyclical Indicators (58 datasets): several asset managers have leveraged

online search data to build indicators for topics such as housing and employment. For
example, the Scientific Activity Equity team at Blackrock4 published a paper that gave an
overview regarding how it uses internet search data to predict U.S. retail sales. Eagle
Alpha has built 8 similar indicators that are inputs into our clients models.

For detailed macro case studies please refer to case studies #17 (page 66), #18 (page
68) and #19 (page 70).

Credit

We have seen credit investors use consumer defaults data to gauge consumer credit,
geo-location data to track distressed situations of retailers and analysis regarding muni-
bonds (e.g. correlation with mentions online of drought in California with the states muni-
bonds). Below we detail specific examples regarding muni-bonds and commercial
mortgage backed securities.

1. Muni-Bonds: in August 2017, IHS Market published a note5 regarding how alternative
data can be used for muni-bonds. Below are the selected highlights:

• “Municipal bond investors are beginning to examine more “non-traditional” datasets for
making investment decisions and surveillance given the potential wide gaps between
reporting periods”.

4 Source: ‘The Evolution of Active Investing. Finding Big Alpha in Big Data’, July 2015

5 Source: ‘Boats, Quotes, and Automobiles: Alternative Data for Municipal Bond Investors’, August 2017

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• “We believe that the inevitable rising rate environment will take away some of the
cushion that has recently allowed municipalities to refinance into lower debt payments,
which will increase the demand for new sources of data to more effectively price and tier
municipal bond risk”.

• “Using Puerto Rico’s ports to gauge government income...the correlation is 54% and the
R-squared is 0.2908 between the four-month lagged ship count and actual monthly tax
collections from January 2014 to June 2017”.

• “Using auto registration data to determine demographic shifts. A proxy for population
migration is the changes in the U.S. auto vehicle registrations…the migration of new
luxury vehicles between states is one potential gauge for the movements of higher
income and net worth individuals among states”.

2. Commercial Mortgage Backed Securities (CMBS): The Scientific Active Equity team
at Blackrock outlined6 how alternative data can be used for CMBS:

• “On the surface, the universe of CMBS appears to be a rather unruly dataset – but
beneath the surface are rich veins of data at the individual loan or pool level. By
combining machine-learning techniques and portfolio manager expertise a deeper
understanding of the underlying data can be gained”.

• “In order to extract value from data on tens of thousands of CMBS loans, it is necessary
to write programmes that can read important information that is generally contained in
an annex to the prospectus supplement for each security. This is a complicated process
with a high potential for error that requires strict quality control standards. In addition to
the top line data that a well-designed algorithm can extract, CMBS can also contain
subordinate financial details that are buried within sub paragraphs or footnotes of loan
documentation. These can significantly alter the top line data”.

• “The details of this kind of subordinate financial need to be assessed manually by

experts with product specific knowledge in order to gain a more complete understanding
of the risk profile of individual loans. If managers are able to combine the necessary
human market expertise with a powerful computing platform, it is possible to build a
model that can help to better predict loan default”.

For a detailed case study regarding credit please refer to case study #20 (page 73).

6 Source: ‘The Evolution of Active Investing. Finding Big Alpha in Big Data’, July 2015

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Section 3.4: Applications by Type of Asset Management Firm

In this section we outline examples of applications for quantitative funds, discretionary

hedge funds and traditional mutual funds.

Quantitative Funds

Many of the early adopters of alternative data were the larger quantitative funds. The use
cases are varied - at JPMorgan’s 2017 quantitative conference 237 investors were asked
“How do you plan to use Big Data and Machine Learning in investing?”

• 30% said to enhance existing risk premia / quant strategies.

• 20% said to build new risk premia / quant strategies.

• 25% said to enhance portfolio construction / risk management.

• 17% said to make discretionary calls / trades.

• 8% said do not plan to use.

In a July 2017 paper entitled “Discover the Hidden World of Alternative Data” WorldQuant
stated: “for investors, especially those who play in the world of quantitative finance,
increasing access to alternative data from emerging sources like IoT could give rise to a
variety of new investment ideas and trading strategies”. Below we outline specific
applications, based on public information, of WorldQuant, Blackrock SAE and Acadian.

WorldQuant7:

• Satellites “can keep track of the number of factories under construction in rural China, a
possible indicator of the strength of that country’s industrial production”.

• “Social media has been a particularly rich source for analysis by investors who are trying
to understand market sentiment and predict business performance”.

• Sentiment “analysis is useful in determining new-product perception and brand

reputation, assisting investors in forming predictions about the growth of a company or
industry”.

• “Real-time access to data on ship movements can prove useful in building a

comprehensive picture of global shipping and an accurate understanding of competitor
and market trends”.

7 Source: ‘Discovering the Hidden World of Alternative Data’, July 2017

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• “Acquiring diverse shipping data can be used to better understand the costs and health
of companies’ supply chains”.

Blackrock SAE8:

• “One area of research that has proved rewarding is measuring the impact of employee
sentiment on company profitability…Today by using big data analysis and
crowdsourcing research, we can not only measure employee sentiment on a much wide
scale, but also in a more timely and accurate way. To do this we automated ‘web-
scraping’ capabilities to look into job sites where employees provide feedback on
thousands of employers around the world, as well as other sources of employee
sentiment including social media, blogs and chat rooms. When all of the relevant data
from these sources has been collected an overall sentiment score for a company is
calculated and this score can be regularly updated and changes monitored”.

• “Rather than focusing on a 70-year-old monthly survey of 500 consumers (Michigan

Consumer Sentiment Index), we think it is possible to achieve more accurate results
with a more modern toolkit and a much larger sample size…Most consumers now
precede big purchases with some research on the internet. By tracking search activity,
around the world, or big-ticket items, we can gain a more complete picture of consumers’
purchasing intentions, which also includes granular data on the types of items that are
likely to be purchased in different geographic regions. The results of this type of analysis
appear promising”.

Acadian9:

• In March 2017 Acadian announced that it was the first investment firm to use Bing
Predicts, a machine-learning project that mines internet search and social-media data,
for factors to try to forecast events like a corporation’s quarterly results.

• “With Bing search history, we know what consumers are searching for, and how that will
relate to the future earnings of companies,” Ryan Stever, director of quantitative global
macro research. “Anything that can speak to the future earnings growth of a company is
going to be valuable to us”.

8 Source: ‘The Evolution of Active Investing. Finding Big Alpha in Big Data’, July 2015

9 Source: ‘Acadian to use Microsoft’s big data technology to help make bets’, March 2017

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Discretionary Hedge Funds

According to the Barclays10 survey regarding alternative data, 24% of discretionary hedge
funds use alternative data with the most popular categories being: 1) consumer credit
card; 2) internet / social media; 3) weather; and 4) satellite. See Figure 5. Applications for
these categories are discussed on pages 10-14.

Figure 5: Results of the Barclays Survey Regarding Alternative Data

Source: Barclays

Below we give three examples of hedge funds that have publicly disclosed that they use
alternative data:

• Third Point11: in its 2016 year-end investor letter stated: “we have added data science
to our toolkit for identifying interesting, uncorrelated opportunities”.

• Point 7212: at a CB Insights conference in June 2016 the Chief Market Intelligence officer
of Point72, Matthew Granade, stated that alternative data is useful for generating alpha.
He said: “it is a real change from how investing used to work…if you want to understand
what is going on with McDonald’s, you are going to have to look at credit card
transactions data, you are going to look at geo-location data, at app downloads and a

10 Source: ‘Rise of the machines’, June 2017

11 Source: ‘Daniel Loeb’s Third Point Hedge Fund 4th Quarter Commentary’, February 2017

12 Source: ‘The New Alpha: How Alternative Data is Going to Change Institutional Investing’, June 2016

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 handful of other things. And suddenly you are going to have a very robust picture of how
McDonald’s is doing and you are not going to have to talk to McDonald’s about that”.

• Citadel13: the firm is building a large centralised data organisation. Ken Griffin, founder
and CEO of Citadel, stated “our ability to leverage big data effectively in our investment
process is critical to our success as a firm”. In July 2017 it announced that Laszlo Korsos,
who most recently served as a lead data scientist at Uber Technologies, was joining the
firm as Chief Data Officer.

Traditional Mutual Funds

A Greenwich Associates14 survey regarding alternative data included responses from 46

traditional mutual funds. When asked what were the benefit metrics of alternative data
sources?

• 57% said changes to business risk predicted in the coming months.

• 46% said predictive indicators of future viability of a business based on its payment
experience.

• 41% said risk of disruption of a business’s supply chain.

• 41% said benchmark or index measuring the health of the small business economy at
the national/regional/industry level.

Based on Eagle Alpha’s dialogue with traditional mutual funds the five most common
applications of alternative data are (in no particular order):

1. Identification of consumer trends and preferences: new products (Samsung S8) and
geographic expansion (e.g. Monster Beverages).
2. Assess corporate quality from employee and customer reviews, social media
commentary and government complaints.
3. Evaluate corporate execution via website changes, store growth, employment data,
export and import data.
4. Monitor industry competition: pricing, promotions.
5. Gauge pace of secular industry trends e.g. the electronification of automobiles.

13 Source: ‘Uber’s Laszlo Korsos Joins Citadel as Chief Data Officer’, July 2017

14 Source: ‘Alternative Data for Alpha’, January 2017

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Below we give three examples of traditional mutual funds that have publicly disclosed that
they use alternative data:

• Schroders15: in its 2015 annual report, Schroders stated that “analysis of ‘big data’ could
become a key differentiator…this year we set up a Data Insights team, representing a
significant new initiative for the Group. The team is focused on developments in data
analytics for investment and research, to enhance and complement the existing skills of
our fund managers and analysts”. The report went on to say “the quantity of information
available for investment research purposes is increasing at such a rate that traditional
industry practices and skillsets are unable to absorb and process it. Global trends in
digitalisation, social media, open data and technology are all creating vast streams of
alternative data that are often highly unstructured and extremely obscure. However, they
contain valuable and often unique insights”.

• State Street: in an August 2016 Institutional Investor article16 entitled “Unexpected risk
meets unexpected data,” State Street’s Chairman and CEO highlighted a few ways
investors can use surprising sources of information to enhance portfolio transparency
and identify risk exposure ahead of potential black swan events e.g. “Online retail. When
consumers order products, they may be helping investors better track inflation trends to
help recalibrate investment strategies before, and after, an event. PriceStats, an inflation
series built by State Street Global Markets on online data, uses technology to monitor
price fluctuations on roughly 5 million items and tends to identify price shocks faster than
similar measures of offline prices, helping investors quickly understand potential shifts
in inflation in more than 70 countries”.

• NN Investment Partners17: In an interview in May 2017 a senior portfolio manager

(Mark Robertson) told Fund Selector Asia that “opinions and emotions expressed in
online content, from news articles, through blogs, forum posts, social media such as
Facebook or LinkedIn, to tweets, can provide a sense of market sentiment that can
reinforce or even anticipate fundamental indicators, thereby helping make investment
decisions”. Mark went on to say that “the big data we’ve incorporated is very good at
picking out turning points and extremes”. The article included a case study:

o In early 2017, the team’s scorecards were generally positive on commodity markets,
despite some signals of credit tightening in China.

15 Source: ‘2015 Markets in Review’, March 2016

16 Source: ‘Unexpected Risk Meets Unexpected Data’, August 2016

17 Source: ‘NN IP Gains From Sentiment Analysis’, May 2017

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o As part of its sentiment analysis, the team monitored political risk and emotional
sentiment indices around commodities.

o “Around mid-April we saw a really sharp deterioration in both of these signals in our
scorecards, at the same time the overall scorecard was still giving us a positive view”.

o The sentiment shift reinforced the misgivings the team already had, based
on their fundamental analysis, and a decision was made to reduce
commodity exposure.

o The Bloomberg Commodity Index subsequently fell from 86.3 on 13 April to

82.0 on 9 May 2017.

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Section 4: 20 Case Studies

In this Section we present 20 case studies that are based on Eagle Alpha proprietary
datasets and tools as well as third party datasets. Our goal is to show case studies relevant
to a variety of asset classes and investment approaches and which use a variety of
alternative data types.

Four of the 20 case studies involve using consumer transaction data for predicting
quarterly revenues of publicly traded companies. Five case studies involve using online
search data as an indicator for corporate revenues and the U.S. unemployment rate.
Three case studies apply web crawled product price data to predict quarterly revenues.
The other case studies draw upon employment, mobile app, social media, credit, trade
and real estate data.

The case studies are in the following order: equity, macro and credit. Within each asset
class the case studies are in the following order: quantitative use cases, short-term
discretionary use cases and long-term discretionary use cases.

# Asset Manager Type Data Key Takeaway Page #

Class Category
1 Equity Quantitative Employment Testing shows that there is alpha in the data, with 27
Fund the “Jobs Active” variable producing the highest
and most consistent returns (6-8% yearly).
2 Equity Quantitative Consumer Cross-sectional analysis of the data (an Eagle 29
Fund Transaction Alpha data partner) vs stock prices performed by
J.P. Morgan, generated annualised returns of
16.2% and a Sharpe ratio of 1.13.
3 Equity Discretionary Consumer Using consumer transaction data, Eagle Alpha’s 31
(JE) (short-term) Transaction predictive model for Just Eat correctly pointed to
stronger than expected revenues in H2 2015 and
H1 2016.
4 Equity Discretionary Consumer Eagle Alpha’s predictive model for PayPal using 33
(PYPL) (short-term) Transaction email receipt data accurately predicted a revenue
beat in Q2 2017.
5 Equity Discretionary Consumer Eagle Alpha’s predictive model for Starbucks using 35
(SBUX) (short-term) Transaction, email receipt data accurately predicted a revenue
Online Search beat in Q2 2017.
6 Equity Discretionary Pricing In Q4 2014, The CAI (China Auto Insight) data was 37
(601633 (short-term) more accurate than consensus estimates at
CH) predicting an important inflection in revenue growth.
7 Equity Discretionary Online Search The search indicator correctly predicted weakness 40
(FINL) (short-term) in Finish Line sales ahead of earnings in December
2016.
8 Equity Discretionary Satellite Satellite data analysis showed falling traffic at 42
(DKS) (short-term) Imagery Dick’s Sporting Goods since the start of 2017. On
August 15th 2017, Dick’s Sporting Goods reported
worse-than-expected results.

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9 Equity Discretionary Pricing Online pricing data pointed to negative 43
(GPRO) (shorter-term) fundamentals for GoPro, which were reflected in
subsequent results and stock price.
10 Equity Discretionary Pricing Online retail data showed improving sell-through 47
(FIT) (longer-term) trends for Fitbit in the first half of 2017. On August
2nd 2017, Fitbit reported better than expected
results with adjusted revenue of $353.3m vs
consensus estimate of $339.2m.
11 Equity Discretionary Consumer Analysis of the email receipt data for Square 49
(SQ) (long-term) Transaction indicated that the growth in number of sellers has
been in decline since the first quarter of 2010.
12 Equity Discretionary Online Search Citi concluded that the short-term 1-month YoY 52
(BRBY) (long-term) observation crossing over the 3-month moving
average YoY indicates major inflection points of
same store sales growth for Burberry.
13 Equity Discretionary Online Search Online search data provided early indicator of 55
(long-term) weakness in sportswear sector. The industry
analysis supported our case for fundamental
weakness for FINL and FL and pointed to longer
term fundamental issues for both companies.
14 Equity Discretionary Mobile App App data showed an early indicator of a positive 59
(TWX) (long-term) inflection in revenue growth for HBO, one of Time
Warner’s largest divisions.
15 Equity Discretionary Social Media Using social media data, we correctly highlighted 61
(ATVI) (long-term) that the Overwatch game was well positioned to set
a new sales record for Activision Blizzard.
16 Equity Discretionary Online Eagle Alpha’s analysis proved correct i.e. 63
(LULU) (long-term) Search, Lululemon reported sales growth of 13% YoY in Q3
Social Media, 2016 which was in line with our expectations.
Pricing
17 Macro Discretionary Online Search EA’s US Unemployment index has a 5-year 66
(long-term) correlation of 0.9 with the US Unemployment Rate,
with an out-of-sample prediction improvement of
14% compared with a baseline ARIMA model.
18 Macro Discretionary Trade Statistical backtesting has proven the indicators are 68
(long-term) Nowcasting frequently a better predictor than street-mean
estimates, while also having the advantage of a
substantial lead time.
19 Macro Discretionary Pricing Online property listings data was used to research 70
(long-term) buy-to-rent investors which led to the subsequent
clamp down on mortgage lending.
20 Credit Discretionary Credit Risk Testing showed that the probability of bankruptcy 73
(long-term) within 12 months ranges from 10% to 50% when a
company gets a stress score of “1”.

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1. Equity > Quantitative Fund > Employment Data

Key Takeaway

Testing shows that there is alpha in the data, with the “Jobs Active” variable producing the
highest and most consistent returns (6-8% yearly).

Dataset

Our data partner collects listings of jobs from corporate websites. It is updated daily and
has 3+ million job listings and descriptions. The company also produces one of the most
accurate estimates for US Non-Farm Payroll figures and provides other macro
employment data. The data covers approximately 15,000 companies in the 2007-2016
period, of which around 3,500 companies are publicly traded in the US.

Backtesting/Significance

We used two variables: “Jobs Created” (number of job posting created by companies) and
“Jobs Active” (number of job postings that are currently active and open). We also
normalized these variables and transformed them using different change specifications.
Then we deflated all variables by the firm market value of equity at the end of the year. In
total, we had 10 variables.

We formed monthly and annual portfolios by dividing the sample of firms based on the 10
variables into both deciles and quintiles. The top portfolio (for deciles - portfolio 10) is the
portfolio of 10% of the firms where the variable examined was the highest for a given
month/year, and the bottom portfolio (portfolio 1) is the 10% of the firms where the variable
is the lowest.

We then calculated each portfolio future returns after the formation period using both
monthly and yearly return horizons. Finally, we calculated the hedge returns, i.e. the top
portfolio average return minus the bottom portfolio average return (portfolio 10 minus
portfolio 1 in the case of deciles).

The results suggest that there is alpha in the variables, with “Jobs Active” producing the
highest and most consistent returns (Figure 6). Yearly hedge returns were between 6-8%.
In the case of “Jobs Created”, yearly hedge returns were between 2-4%.

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Figure 6: Jobs Active Portfolio Returns

Source: Employment Data, Eagle Alpha

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2. Equity > Quantitative Fund > Consumer Transaction Data

Key Takeaway

Cross-sectional analysis of our partner dataset, performed by J.P. Morgan, generated

annualised returns of 16.2% and a Sharpe ratio of 1.13.

Dataset

The dataset is delivered through a partnership with a provider that collects anonymized
purchase data from around 2 million active shoppers, scanned from email purchase
receipts. It covers over 600 merchants from more than 25 industries.

The provider transforms multiform unstructured email receipt data into a normalized
digestible consumer transaction dataset. The dataset is also granular as it includes item
and SKU-level transaction data, which is filtered into 53 product categories.

Below we include an extract from J.P. Morgan’s report “Big Data and AI Strategies.
Machine Learning and Alternative Data Approach to Investing.” J.P. Morgan analyzed a
dataset of email receipts for 97 companies. 36 of these were private companies, and 61
public, 31 of which were S&P 500 constituents.

Taking liquidity into consideration, J.P. Morgan decided to test trading signals for the S&P
500 companies only.

Backtesting/Significance

We analyzed three time series: the dollar spend, number of orders and number of buyers.
While number of orders and number of buyers are highly correlated (~99%), dollar spend
is not highly correlated with number of buyers/orders (~25%).

We aggregated the daily spend/order/buyer data into a weekly score and calculated week-
over-week percentage change for each. After winsorizing to 5th-95th percentile, we tested
both the level and z-score as signals. Based on a cross-sectional comparison, we went
long the top 5 stocks and short the bottom 5 stocks. The portfolio was rebalanced weekly.

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Figure 7: Sharpe ratios of various strategies using Dollar Spend, Buyer Count and Order Count

Source: J.P. Morgan Macro QDS, Eagle Alpha

We also plot cumulative returns using the level (i.e. percentage of aggregated figure) and
the 4-week z-score for all 3 datasets.

Figure 8: Performance of level (left) and time-series z-score of changes (right) as trading signals

Source: J.P. Morgan Macro QDS, Eagle Alpha

The 4-week z-score on the Dollar Spend metric displayed an impressive sharpe ratio of
1.13 (Figure 7). Annualised returns for this same portfolio also impressed at 16.2%. This
can be seen in the right-hand chart in Figure 8 above.

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3. Equity (Just Eat JE) > Discretionary (Short-Term) > Consumer Transaction Data

Key Takeaway

Using consumer transaction data, Eagle Alpha’s predictive model for Just Eat correctly
pointed to stronger than expected revenues in H2 2015 and H1 2016.

Dataset

Consumer transaction data is provided by Eagle Alpha’s partner and consists of

anonymized panel data drawn from users of the UK's largest personal financial assistant,
an app/web platform. Data is collected in near real-time, directly from bank and credit card
records.

The panel consists of 230 million transactions across over 500,000 accounts and grows
by an average of 5 million transactions per month. With each panel member holding an
average of 4 financial accounts, across multiple providers, this consumer transaction
dataset represents the UK’s largest complete collection of consumer financial activity.

Backtesting/Significance

Eagle Alpha’s Just Eat model based on U.K. consumer transaction data has shown a
MAPE of 1.8% in backtesting, a large improvement on consensus which has an MAPE of
3.7%.

Note: testing of this dataset across 41 UK retailers found that it improved the predictive
power of a baseline ARIMA model in 88% of cases.

Case Study

Using consumer transaction data, Eagle Alpha’s predictive model for Just Eat correctly
pointed to stronger than expected revenues in H2 2015 and H1 2016.

Our ARIMAX model forecasted H1 2016 revenues at 171.6m compared to a consensus

estimate of 163m. In H2 2015 our model predicted revenues of 144.8m compared to a
consensus estimate of 134m.

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enquiries@eaglealpha.com
Figure 9: Eagle Alpha’s Model Predicted Stronger Than Expected Results

Source: Eagle Alpha Analysis, Consumer Transaction Data, Bloomberg

Actual revenues for the second half of 2015 came in at 140m beating consensus, in line
with our prediction. Following the H1 2016 beat the Just Eat share price rose by 4.3% on
the day and 17.6% on the month. Similarly, the stock rose by 3% after the H2 2015 beat.

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4. Equity (PayPal PYPL) > Discretionary (Short-Term) > Consumer Transaction

Key Takeaway

Eagle Alpha’s predictive model for PayPal using email receipt data accurately predicted a
revenue beat in Q2 2017.

Dataset

The dataset is delivered through a partnership with a provider that collects anonymized
purchase data from around 2 million active shoppers, scanned from email purchase
receipts. It covers over 600 merchants from more than 25 industries.

The provider transforms multi-form unstructured email receipt data into a normalized and
digestible consumer transaction dataset. The dataset is also granular as it includes item
and SKU-level transaction data, which is filtered into 53 product categories.

Backtesting/Significance

Eagle Alpha’s PayPal model has a MAPE of 1.6% and the standard deviation of our error
is 2.0%. With a low historical mean error, we had confidence in our PayPal predictive
estimate for Q2 2017.

Note: broader testing of this dataset across 66 US retailers found that it improved the
predictive power of a baseline ARIMA model in 60% of cases. In additon, Eagle Alpha’s
Data Insights team has published 5 quarterly reports incorporating predictive indicators
using this dataset. Three of these indictors proved accurate equating to a hit rate of 60%.

Case Study

On July 13th 2017, Eagle Alpha published a research note analyzing PayPal’s Q2 using
email receipt data. Eagle Alpha’s PayPal predictive model suggested better Q2 revenue
than consensus estimates.

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Figure 10: Eagle Alpha Model Predicted June Quarter Upside for PayPal

Source: Eagle Alpha Analysis, Email Receipt Data, Bloomberg

In the note, we concluded: “Using email receipt data, Eagle Alpha’s predictive model for
PayPal is pointing to a stronger than consensus quarter for revenue in the June quarter.
The current Bloomberg estimates for PayPal is $3,093m.”

On July 26th 2017, PayPal reported better-than-expected results and raised revenue
estimates for the full fiscal year. The company reported revenue of $3.14B.

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enquiries@eaglealpha.com
5. Equity (Starbucks SBUX) > Discretionary (Short-Term) > Consumer Transaction

Key Takeaway

Eagle Alpha’s predictive model for Starbucks using email receipt data accurately predicted
a revenue beat in Q2 2017.

Datasets

The dataset is delivered through a partnership with a provider that collects anonymized
purchase data from around 2 million active shoppers, scanned from email purchase
receipts. It covers over 600 merchants from more than 25 industries.

The provider transforms multi-form unstructured email receipt data into a normalized and
digestible consumer transaction dataset. The dataset is also granular as it includes item
and SKU-level transaction data, which is filtered into 53 product categories.

Google Trends is a public web facility based on Google Search that shows how often a
particular search term is entered relative to the total search-volume over time across
various regions of the world. Using Google Trends, Eagle Alpha has built company specific
indices based on search terms that are related to a given retailer’s product offering. This
involves an exhaustive process for identifying search terms related to a company’s
revenues using both internal and third party tools.

Backtesting/Significance

Our Starbucks model, based on email receipt data, has a MAPE of 5.8% and the standard
deviation of our error is 6.9%. Note: broader testing of the email receipt dataset across 66
US retailers found that it improved the predictive power of a baseline ARIMA model in
60% of cases.

Over the last 19 quarters our Starbucks search index based on Google search volumes
has demonstrated a two-quarter hit rate of 68% in in-sample testing, and a three quarter
hit rate of 53%. This means that 68% of the time the three-month moving average has
moved in the same direction as same store sales over a two-quarter period.

Eagle Alpha’s Data Insights team has published 21 quarterly reports for consumer
companies incorporating Google search data. 15 of these indicators proved accurate
equating to a hit rate of 71%.

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enquiries@eaglealpha.com
Case Study

Using email receipt and Google search data, Eagle Alpha published a research report on
July 14th 2017 predicting a weaker June quarter for Starbucks versus consensus.

Figure 11 below shows that according to Eagle Alpha’s predictive model Bloomberg
estimates for Starbucks FYQ3 were too high. Consensus revenue estimates were at
$5.75bn as analysts were predicting a YoY revenue growth of 9.9%.

Our Starbucks search index (Figure 12) was in line with the previous two quarters, calling
into question consensus expectations for SSS to accelerate later in 2017.

Figure 11: Eagle Alpha Model Predicted June Quarter Downside for Starbucks

Source: Eagle Alpha Analysis, Email Receipt Data, Bloomberg

Figure 12: Search Data Suggested Stagnant Quarterly Growth

Source: Eagle Alpha Analysis, Email Receipt Data, Bloomberg

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6. Equity (Great Wall Motors 601633 CH) > Discretionary (Short-Term) > Pricing Data

Key Takeaway

In Q4 2014, The CAI (China Auto Insight) data was more accurate than consensus
estimates at predicting an important inflection in revenue growth.

Dataset

Eagle Alpha’s CAI dataset is provided through a partnership agreement with a leading
Chinese financial automotive consultant. The dataset is collected using a large panel of
dealerships throughout China, combining other data sources such as web data and more
traditional data sets to create a large and well-structured database.

Backtesting/Significance

The CAI data shows a 99% correlation with revenues for domestic Chinese auto
manufacturer Great Wall Motors (601633 CH) over a 5-year period, and a 95% correlation
with YoY revenue growth. The calculated dealership revenue also correctly projected the
directional movement of reported revenues for Great Wall in fourteen of the fifteen
quarters between Q1 2013 and Q3 2016.

An ARIMAX18 model for predicting Great Wall Motors (601633 CH) revenue demonstrated
an out-of-sample MAPE of 4.9%. This compares to a MAPE of 10.3% on a baseline
ARIMA model using just historic revenues. The error rate for market consensus estimates
was 8.1% over the same period. Directional accuracy is also markedly improved over the
baseline model, increasing from 57% to 86%.

Note: Eagle Alpha has published 31 quarterly reports incorporating scraped data. 20 of
these indicators proved accurate equating to a hit rate of 65%.

Case Study

The 4.9% error rate discussed above is better than the error rate for market consensus
estimates of 8.1% over the same period. This is shown in Figure 13 below. The analyst
estimates in this calculation were taken one month after the end of the quarter, as the CAI
data is published between 5 and 20 days after month-end. It’s clear that the predictive

18
Autoregressive integrated moving average with exogenous variables

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enquiries@eaglealpha.com
model using CAI data provides investors with a more accurate revenue estimate for Great
Wall Motors.

Figure 13: Reported Numbers V Estimates V EA Prediction

24

22

20

18

16

14

12
Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16

Reported Analyst Estimate Before Revisions Prediction (ARIMAX)

Source: Eagle Alpha Analysis, Bloomberg, CAI Data

In Q4 2014, the CAI data was more accurate than consensus estimates at predicting an
important inflection in revenue growth. Analyst estimates were for QoQ revenue growth of
17% for Great Wall Motors, compared to reported QoQ growth of 42%. Estimated QoQ
growth based on the CAI raw data was much closer at 48%.

Figure 14: Great Wall Revenue Prediction

Source: Eagle Alpha Analysis, Bloomberg, CAI Data

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This case study was validated by Citi and included in their report titled ‘Searching for
Alpha: Big Data. Navigating New Alternative Datasets’ (Figure 15).

Figure 15: Great Wall Motors Revenue Growth vs CAI Dealership Data

Source: Eagle Alpha, Bloomberg, CAI Data, Citi Research

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7. Equity (Finish Line FINL) > Discretionary (Short-Term) > Online Search Data

Key Takeaway

The search indicator correctly predicted weakness in SSS ahead of earnings in December
2016. The company’s stock reacted to the change in fundamentals and is down
significantly since then.

Dataset

Google Trends is a public web tool based on Google Search that shows how often a
particular search term is entered relative to the total search-volume over time across
various regions of the world. Using Google Trends, Eagle Alpha has built company
specific indices based on search terms that are related to a given retailer’s product
offering. This involves an exhaustive process for identifying search terms related to a
company’s revenues using both internal and third party tools.

Significance

Observing crossing points of three-month and one-month moving averages of one of

these search indices has proved predictive of inflection points in revenue growth for
companies across a broad range of sectors including retail, luxury goods and restaurants.

Over the last 18 quarters the Finish Line indicator demonstrated a three-quarter hit rate
of 78% in in-sample testing. This means that 78% of the time the three-month moving
average has moved in the same direction as same store sales over a three-quarter period.

Note: Eagle Alpha has published 21 quarterly reports for consumer companies
incorporating Google search data. 15 of these indicators proved accurate equating to a
hit rate of 71%.

Case Study

On December 5th 2016, Eagle Alpha published a report on US sports retailer Finish Line
using Google Trends data. The Figure 16 below shows the signal pointing to a strong
uptrend prior to the August 2016 quarter when the company reported better than expected
results.

However, the directional change of the index in the November 2016 quarter indicated that
Finish Line’s SSS (same-store sales) growth was at risk and Eagle Alpha data insight
analysts anticipated that management outlook for the following quarter could disappoint.

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On December 21st 2016, Finish Line reported a weak quarter and gave poor guidance for
the following quarter. “We are disappointed that our third quarter sales and earnings fell
short of our expectations,” said Sam Sato, Chief Executive Officer of Finish Line.

Eagle Alpha’s Data Insights report on December 5th 2016, indicated that the search index,
an indicator of consumer demand based on online search data, was pointing to weakness
in SSS for Finish Line. The report stated: “the sharp downtrend observed in the index in
recent months (Figure 16) indicates that expectations for SSS growth at FINL are at risk,
or that management outlook for the February quarter may disappoint”.

Finish line reported SSS of 0.7% for the November 2016 quarter compared to
expectations for growth in excess of 4%. The company also reported a significant drop in
SSS in the February quarter of -4.5%.

The search indicator correctly predicted weakness in SSS ahead of earnings. The
company’s stock reacted to the change in fundamentals and is down significantly since
then.

Figure 16: Search Signal Index for FINL

Source: Eagle Alpha Analysis

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8. Equity (Dick’s Sporting Goods DKS) > Discretionary (Short-Term) > Satellite

Key Takeaway

Satellite data analysis showed falling traffic at Dick’s Sporting Goods since the start of
2017. On August 15th 2017, Dick’s Sporting Goods reported worse-than-expected results.

Dataset

The case study presented below was prepared by a satellite imagery data analytics
company that catalogued and backtested more than one million parking lot images that
accounted for 1.5 billion cars over seven years. The traffic data obtained from satellite
images can then be used to analyze cumulative YoY car count growth rates and compare
it to revenue growth and share price dynamics.

Case Study

Car counts at Dick’s Sporting Goods have been falling since the start of 2017. There was
a 7.2% YoY drop in Q1 2017 and then a further 8.4% YoY drop in Q2 2017 (Figure 17).
The downward trend continued in July and August 2017 proving to be an early indicator
of Q2 2017 results.

On August 15th 2017, Dick’s Sporting Goods reported worse-than-expected results with
same store sales rising by 0.1% which was much lower than the company’s forecast of 2-
3% and the consensus estimate of 1.7%.

Figure 17: DKS Cumulative YoY% Change in Car Counts

Source: Satellite Data Analytics Provider

Disclaimer

This case study is directly from the vendor and Eagle Alpha has not backtested the data.

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9. Equity (GoPro GPRO) > Discretionary (Shorter-Term) > Pricing Data

Key Takeaway

Online pricing data pointed to negative GoPro (GPRO) fundamentals, which were
reflected in GoPro’s subsequent results and, ultimately, GoPro’s stock price.

Dataset

Pricing data is crawled from the websites of large retailers. This can provide an insight
into long term trends, as well as the most recent trading performance, and is based on
metrics such as average selling price and share of bestselling products in a category.
Eagle Alpha owns this dataset.

The dataset currently supports over 100 brands/companies from categories including
Tech Hardware (e.g. Apple, Cisco, Canon), Consumer Electronics (e.g. Sony, LG
Electronics, Harman), Household Appliances (e.g. Whirlpool, Electrolux) and Leisure
Products (e.g. Mattel, Hasbro) and the list is growing all the time.

Significance

Pricing data has proved valuable at providing a directional indicator for the sales of
consumer products, particularly around major product launches.

Note: Eagle Alpha has published 31 quarterly reports incorporating scraped data. 20 of
these indicators proved accurate equating to a hit rate of 65%.

Case Study

Eagle Alpha first published a Data Insights report on action camera manufacturer GoPro
(GPRO US) on October 21st 2015. The data from US electronics websites pointed to
potential weakness in GoPro revenue for the third quarter of that year. The crawled data
was showing weak demand for GoPro’s products, and a negative mix shift to lower end
products that was likely to impact average selling prices (ASP). The report also highlighted
weakness in the ranking of bestselling cameras, including the Session product which had
recently been released (Figure 18).

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Figure 18: Weakness in the Ranking of Bestselling Cameras

Source: Eagle Alpha Analysis, E-Commerce Data

Subsequent Eagle Alpha reports in 2016 continued to point out that demand for GoPro
was diminishing and that ASP trends continued to remain under pressure. A report on
February 9th 2016 titled “Focus on Entry Level Products Ignores Issues Elsewhere”
showed that GoPro was seeing price pressure across all price points and that growth in
lower end cameras was unlikely to compensate for price and share compression of mid-
range and higher end products (Figure 19).

Figure 19: Split of Bestsellers by Price Segment

50%
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%

Low End Mid Range High End

Source: Eagle Alpha Analysis, E-Commerce Data

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By the September quarter of 2016 Eagle Alpha analysis was showing that “key elements
are stabilizing for the action camera brand … but YoY pressure persists”. This quarterly
update also highlighted that the introduction of the new Karma drone, which was expected
to be received well by consumers and investors, had failed to ignite attention. Using our
Web Queries tool, Eagle Alpha discovered evidence that the Karma drone had lost out to
rival DJI Mavic shortly after its launch (Figure 20).

Note: our Web Queries tool that enables clients to obtain analytics on over 90 million web
sources including: blogs, image and video sites, forums, review sites, social media and
news sites.

Figure 20: The Mavic Gained Edge on The Karma

95%

90%

85%
Positive Mentions (%)

80%

75%

70%

65%

60%

55%

50%
Launch Day 1 Day 2 Day 3 Day 4 Day 5 Day 6 Day 7 Day 8 Day 9 Day 10

DJI Mavic GoPro Karma

Source: Eagle Alpha’s Web Queries Tool

In addition, the crawled e-commerce data showed that a “month after launch the DJI Mavic
was 19th on the list of bestsellers while the GoPro Karma was 54th”. This had implications
for the company heading into the important holiday spending period in the US.

These negative fundamentals were reflected in GoPro’s stock price over the period of
Eagle Alpha’s coverage. The relative performance of GoPro compared to the S&P 500
over the period can be seen in the following chart (Figure 21).

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Figure 21: Indexed Share Price Performance

Source: Eagle Alpha Analysis, Bloomberg

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10. Equity (Fitbit FIT) > Discretionary (Longer-Term) > Pricing Data

Key Takeaway

Online retail data showed improving sell-through trends for Fitbit in the first half of 2017.
On August 2nd 2017, Fitbit reported better than expected results with adjusted revenue
of $353.3m vs consensus estimate of $339.2m.

Dataset

Pricing data is crawled from the websites of large retailers. This can provide an insight
into long term trends, as well as the most recent trading performance, and is based on
metrics such as average selling price and share of bestselling products in a category.
Eagle Alpha owns this dataset.

The dataset currently supports over 100 brands/companies from categories including
Tech Hardware (e.g. Apple, Cisco, Canon), Consumer Electronics (e.g. Sony, LG
Electronics, Harman), Household Appliances (e.g. Whirlpool, Electrolux) and Leisure
Products (e.g. Mattel, Hasbro) and the list is growing all the time.

Backtesting/Significance

Eagle Alpha has published 31 quarterly reports incorporating scraped data. 20 of these
indicators proved accurate equating to a hit rate of 65%.

Case Study

On July 4th 2017, Eagle Alpha published a research note analyzing Fitbit’s Q2 2017 with
the use of online retail pricing data. Our analysis showed improving sell-through trends in
the first half of the year. We noted the company’s previous comments on improving
inventory and concluded that Fitbit would report stronger than expected revenue.

Figure 22 below shows that Fitbit’s share of bestsellers stabilized in Q2 as it further

consolidated its position as the number one ranked fitness watch (Figure 23).

On August 2nd 2017, Fitbit reported better than expected results with adjusted revenue
of $353.3m vs consensus estimate of $339.2m. Inventory was again mentioned by CEO
James Park following these results. James stated "consumer demand in the second
quarter was better than anticipated, enabling Fitbit to reduce channel inventory and
generate better sales," which was in line with our analysis.

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Figure 22: Online Data Showed Fitbit’s Improving Share Trends

Source: Eagle Alpha Analysis, Online Retail Data

Figure 23: Fitbit Consolidated Top Ranking in Fitness Watches in Q2

Source: Eagle Alpha Analysis, Online Retail Data

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11. Equity (Square SQ) > Discretionary (Long-Term) > Consumer Transaction Data

Key Takeaway

Analysis of the email receipt data for Square indicated that the growth in number of sellers
has been in decline since the first quarter of 2016.

Dataset

The dataset is delivered through a partnership with a provider that collects anonymized
purchase data from around 2 million active shoppers, scanned from email purchase
receipts. It covers over 600 merchants from more than 25 industries.

The provider transforms multi-form unstructured email receipt data into a normalized and
digestible consumer transaction dataset. The dataset is also granular as it includes item
and SKU-level transaction data, which is filtered into 53 product categories.

Backtesting/Significance

Eagle Alpha’s predictive model for Square has a mean absolute percentage error (MAPE)
of 1.4%, compared to a consensus error of 4.7%. The standard deviation of our error is
1.6%.

Eagle Alpha’s Data Insights team has published 5 quarterly reports incorporating
predictive indicators using the US Email Receipt Data. Three of these indicators proved
accurate equating to a hit rate of 60%.

Case Study

Square held an analyst day in May 2017 where the company gave details on its growth
strategies. Two key parts for future growth are to move the company up market to get
larger merchants, or sellers, to use Square devices and secondly to grow and retain
existing merchants.

Larger sellers are users that have greater than $125k in annualized gross payment volume
(GPV). In the June quarter of 2017, Square reported stronger than expected revenue.
Adjusted revenue ticked up sequentially to 41% YoY growth, from 39% in the March
quarter.

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In our data insights report, titled “Email Receipt Data Reveals Improving Seller
Fundamentals”, Eagle Alpha examined historical trends for Square sellers and dollar
spend at sellers using an email receipt dataset. Square does not disclose seller metrics in
annual or quarterly reports.

Analysis of the email receipt data indicated that the growth in number of sellers has been
in decline since the first quarter of 2016. This has been the primary driver of slowing
revenue growth for Square over this period (Figure 24). However, in the June quarter the
number of sellers using Square’s platform increased sequentially from 15% in March to
17%. This can also be seen in the unique seller index, where sellers increased to 396 from
an average of 325 for all of 2016 (Figure 25).

Figure 24: Metrics for Sellers Improving

Source: Eagle Alpha Analysis

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Figure 25: Unique Seller Index

Source: Eagle Alpha Analysis

From the email receipt data, we can also observe that average spend per seller was
declining on a YoY basis during 2016. However, growth in spend per seller turned positive
in Q4 2016 and this improvement has been helping revenue growth over the first half of
2017.

Data on growth in total sellers, and the amount sold per seller, may be an indication that
growth strategies outlined by the company are starting to gain traction and are a positive
sign for longer term fundamentals of the company.

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12. Equity (Burberry BRBY) > Discretionary (Long-Term) > Online Search Data

Key Takeaway

Citi concluded that the short-term 1-month YoY observation crossing over the 3-month
moving average YoY indicates major inflection points of same store sales growth for
Burberry.

Dataset

Google Trends is a public web tool based on Google Search that shows how often a
particular search term is entered relative to the total search-volume over time across
various regions of the world. Using Google Trends, Eagle Alpha has built company
specific indices based on search terms that are related to a given retailer’s product
offering. This involves an exhaustive process for identifying search terms related to a
company’s revenues using both internal and third party tools.

Significance

Observing crossing points of three-month and one-month moving averages of one of

these search indices has proved predictive of inflection points in revenue growth for
companies across a broad range of sectors including retail, luxury goods, restaurants and
2B software.

Over the last 19 quarters the Burberry indicator demonstrated a two-quarter hit rate of
58% in in-sample testing, and three-quarter hit rate of 68%. This means that 58% of the
time the three-month moving average has moved in the same direction as same store
sales over a two-quarter period.

We prefer to measure the accuracy of our search signals indicators by reference to the hit
rate, as we believe it better captures the goal of the tool to identify inflection points in
growth for a company. However, below we present analysis from Citi’s March 2017 report
"Searching for Alpha: Big Data" which focuses on correlations.

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Figure 26 appears to support our prior that short-term 1-month YoY observation crossing
over the 3-month moving average YoY indicates major inflection points of same store
sales growth as depicted by the green circles on the chart. Another interesting finding is
that consensus19 is pretty bad at predicting same store sales growth. In fact, it only
achieves close to 20% of correlation with actual reported figures. With either the 1-month
YoY or 3-month moving average YoY measures based on EA equity index for Burberry,
the correlation jumps to over 70% which is a significant improvement. The additional
advantage of this search data is its timeliness – the data at the end of the quarter is
available immediately, whilst official figures typically are announced at least 3 weeks after
quarter-ends. The timeliness and much improved correlation of the new dataset with
actual reported figures make such an offering appealing.

In Figure 27 we highlight that same store sales does have pricing impact especially the
surprise element of it. That is, markets react to the positive/negative sales surprise. This
suggests that, if we are able to predict the inflection points better with Google Trends data,
there could be pricing implications from being able to act sooner and more accurately than
the bulk of investors.

Figure 26: Burberry Same Store Sales vs Eagle Alpha Stock Index

Source: Eagle Alpha, Citi Research

19
The consensus data is sourced from Bloomberg but it has low analyst coverage issues as not all analysts publish their
estimates for same store sales.

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Figure 27: Burberry's Same Store Sales Surprise vs Share Price

Source: Bloomberg, Citi Research

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13. Equity (Sportswear Industry) > Discretionary (Long-Term) > Online Search Data

Key Takeaway

Online search data provided early indicator of weakness in sportswear sector. The
industry analysis supported our case for fundamental weakness for FINL and FL and
points to longer term fundamental issues for the sportswear space.

Dataset

Google Trends is a public web tool based on Google Search that shows how often a
particular search term is entered relative to the total search-volume over time across
various regions of the world. Using Google Trends, Eagle Alpha has built company
specific indices based on search terms that are related to a given retailer’s product
offering. This involves an exhaustive process for identifying search terms related to a
company’s revenues using both internal and third party tools.

Significance

Observing crossing points of three-month and one-month moving averages of one of

these search indices has proved predictive of inflection points in revenue growth metrics
for companies across a broad range of sectors including retail, luxury goods and
restaurants. Over a nineteen quarter period a Search Signal for Finish Line (FINL) and
Foot Locker (FL) has demonstrated a three-quarter hit rate of 74% in in-sample testing.
This means that 74% of the time the three-month moving average has moved in the same
direction as same store sales (SSS) over a three-quarter period. Over a twelve quarter
period the indicator for Under Armour (UAA) has demonstrated a three-quarter hit rate of
67% in in-sample testing.

Note: we have published 21 quarterly reports for consumer companies incorporating

Google search data. 15 of these indicators proved accurate (71% hit rate).

Case Study

In December 2016, Eagle Alpha published a report on US sports retailer FINL and FL
using Google Trends data. The Search Signal for Finish Line was indicating that SSS
growth was at risk and could disappoint management expectations. Subsequently Finish
Line reported a poor quarter and offered weak guidance for the March quarter. In February
of 2017 Eagle Alpha published a follow up report on the sports retailers where we
highlighted that the Search Signal for FL had deteriorated and pointed to a risk of the
company missing expectations. The company reported strong SSS and offered positive
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guidance for the April quarter. However, in April the company preannounced negatively
for the quarter, reducing SSS guidance from 5% to 2%. When the company reported the
quarter SSS was just 0.5%. Search Signals proved to be an early indicator of fundamental
weakness for both FL and FINL.

The negative trends seen at FL and FINL triggered Eagle Alpha to take a deeper dive into
the industry to see what could be catching company management off guard. Analysis of
industry trends led to the conclusion that the problems for FINL and FL were more rooted
in industry dynamics than company specific issues. This can be seen in Figure 28. Using
Google Trends, we created indices of sports apparel and sports footwear for the big three
global sports brands of Adidas, Nike and Under Armour.

We also created a combined index of all three brands. As can be seen in Figure 28, a
three-month moving average of our index began to roll over in early 2016, stabilized
somewhat in mid-2016 and then accelerated to the downside in late 2016. The decline in
the combined index happened in waves. This can be observed by looking at the individual
brands. Nike rolled over in early 2016, followed by Under Armour in mid-2016 and finally
by Adidas in late 2016. Looking at consumer interest in sports footwear alone, we created
an index of sports shoes for the top 3 global brands plus Asics, Puma, Vans and New
Balance. This index declined through 2016 and accelerated to the downside, into negative
growth, in late 2016 and early 2017 (Figure 29). The sharp drop in both the sports index
and shoe index in late 2016 coincided with the negative report from FINL and the delayed
reaction from FL in the spring of 2017.

Figure 28: Big 3 Global Brands in Decline Through 2016

Source: Eagle Alpha Analysis

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Figure 29: Shoe Index Turns Negative in Early 2017

Source: Eagle Alpha Analysis

This industry analysis supported our case for fundamental weakness for FINL and FL and
pointed to longer term fundamental issues for both companies. The Search Signal
indicators for both companies remained weak in June, indicating further potential
weakness in SSS. The June 2017 report included Figure 30, below, of Foot Locker.
Subsequently both FL and FINL reported very weak quarters and the stocks traded off
significantly. From the time of Eagle Alpha’s first Search Signal report on FINL and FL in
December of 2016 to September of 2017 the stocks declined 65% and 55% respectively.

Figure 30: Foot Locker Trends Leading SSS Decline

Source: Eagle Alpha Analysis

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Figure 31: Under Armour Trends in Steep Decline

Source: Eagle Alpha Analysis

Eagle Alpha’s industry report in June 2017 included a Search Signal for Under Armour
that also showed very negative search trends (Fig 31). When UAA reported, management
lowered guidance for the full year. The stock declined approximately 30% in the two
months after our report.

Investors have only recently started to consider the implications for Adidas and Nike of
the negative results at the retailers and Under Armour. These stocks have been weak in
recent months and have seen broker downgrades. However, headwinds for the sector
were apparent in search data over 12 months before.

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14. Equity (Time Warner TWX) > Discretionary (Long-Term) > Mobile App Data

Key Takeaway

App data showed an early indicator of a positive inflection in revenue growth for HBO, one
of Time Warner’s largest divisions.

Dataset

App download and usage data is an example of an alternative data source that can be
used to analyze product adoption and brand satisfaction. This type of data enables
investors to track activity in a wide range of sectors from banking to food delivery to online
entertainment.

Case Study

On July 19th 2017, an app data provider published a report highlighting record number of
new installations of both HBO NOW and HBO GO. The network’s streaming services
reached the peak of approximately 222,000 installs due to the premiere of season seven
of Game of Thrones (Figure 32).

Figure 32: HBO Mobile App Peak New Installs (United States)

Source: App Data Provider

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The subsequent report publish on August 18th stated: “The sizable influx of new
subscribers reflected in our download estimates at the time drove record single-day
revenue one month later as their 30-day free trials converted to paid subscriptions.”

HBO NOW rose to the top of the App Store revenue charts and grossed around $2.6
million across both the App Store and Google Play on August 16th 2017. This represents
a 41% increase over the previous record of $1.3 million recorded on June 24th 2016.

HBO is one of Time Warner’s largest divisions but growth for the division has been slowing
in recent quarters, therefore this analysis could be an early indicator of a positive inflection
in revenue growth for HBO.

Disclaimer

This case study is directly from the vendor and Eagle Alpha has not backtested the data.

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15. Equity (Activision Blizzard) > Discretionary (Long-Term) > Social Media Data

Key Takeaway

Using social media data, we correctly highlighted that the Overwatch game was well
positioned to set a new sales record for Activision Blizzard (ATVI).

Backtesting/Significance

Eagle Alpha’s Data Insights team has published 12 quarterly reports incorporating social
data. 10 of these indicators proved accurate equating to a hit rate of 77%.

Dataset

Social media data is created through the public’s interaction with social media platforms
such as Twitter, Facebook, YouTube and Twitch. Access to this data can be obtained
directly from the provider themselves or often through third party platforms. This case
study also incorporated Eagle Alpha’s Web Queries tool. Web Queries is a query based
tool that enables clients to obtain analytics on over 90 million web sources including:
blogs, image and video sites, forums, review sites, social media and news sites.

Case Study

On June 3rd 2016, Eagle Alpha published a Data Insights report on video games publisher
Activision Blizzard (ATVI US) titled “Activision Blizzard: Overwatch Positioned to Set New
Sales Record.” The report highlighted the potential success of the company’s latest game,
Overwatch. Overwatch enjoyed stronger Twitter visibility when compared to the
competition and the strong positive sentiment towards the title pointed to positive
consumer reaction to the title.

Figure 33: Overwatch Twitter Visibility Much Stronger than Comp Titles

Source: Eagle Alpha Web Queries

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Over 1.2m tweets mentioned Overwatch in the first week post the game’s launch, while
the competition gathered much lower number of mentions: Black Ops III (1m), Fallout
(840k) and the Division (720k).

The Eagle Alpha Web Queries tool was also used to analyse consumer comments and
sentiment around Overwatch. The first week comparative statistics are presented below,
and clearly show a stronger performance for Overwatch compared to rival titles.

Figure 34: Overwatch Leads on Twitter Sentiment for First Week

Source: Eagle Alpha Web Queries, Twitter

On June 14th 2016, Activision reported that Overwatch had over 10 million players after
only three weeks of the launch. The Division, on the other hand, was launched in the
beginning of March 2016 and had 9.5 million players more than two months after the
launch.

In August 2016, Overwatch hit the 15 million user mark, reaching the milestone faster than
any other game in Blizzard's history. More recently, January 27th 2017, Activision
announced that Overwatch reached another milestone by amassing more than 25 million
players.

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16. Equity (Lululemon LULU) > Discretionary (Long-Term) > Online Search, Social
Media, Pricing Data

Key Takeaway

Eagle Alpha’s analysis proved correct, i.e. Lululemon (LULU) reported sales growth of
13% YoY in Q3 2016 which was in line with our expectations.

Datasets

Google Trends is a public web tool based on Google Search that shows how often a
particular search-term is entered relative to the total search-volume over time across
various regions of the world.

Social media data is created through the public’s interaction with social media platforms
such as Twitter, Facebook and YouTube. Access to this data can be obtained directly from
the provider themselves or often through third party platforms.

Pricing data is crawled from the websites of large retailers. This can provide an insight
into long term trends, as well as the most recent trading performance, and is based on
metrics such as average selling price and share of bestselling products in a category.
Eagle Alpha owns this dataset.

This case study also incorporated Eagle Alpha’s Web Queries tool. Web Queries is a
query based tool that enables clients to search over 90 million web sources including:
blogs, image and video sites, forums, review sites, social media and news sites.

Case Study

Lululemon’s (LULU) same-store sales (SSS) have been decelerating since the beginning
of 2016 with Q2 numbers particularly disappointing. On November 22nd 2016, Eagle
Alpha published a note on Lululemon highlighting stabilized momentum in Q3. Figure 35
below shows that search data suggested stable to improving SSS in Q3 2016.

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Figure 35: Search Signal Index for LULU

Source: Eagle Alpha Analysis

According to social media data, the athleisure trend was experiencing continued pressure.
However, Lululemon improved its competitive position as the company received a
meaningful share of mentions across blogs and forums for the first time since 2014 (Figure
36).

Eagle Alpha’s YoY average selling price (ASP) estimate for Lululemon grew by 13% in Q3
2016, representing the fastest change since Q1 2015 (Figure 37).

Figure 36: Lululemon Share of Mentions Across Blogs and Forums

Source: Eagle Alpha Web Queries

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Figure 37: Lululemon Price Growth Accelerated

Source: Eagle Alpha Analysis, Online Pricing Data

In our November 2016 report, we concluded: “consensus estimates are for Q3 2016
revenues growth of 13% YoY, slightly behind the 14% number reported in Q2. This
revenue growth looks achievable.” On December 7th 2016, Lululemon reported sales
growth of 13% YoY – in line with our expectations.

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17. Macro > Discretionary (Long-Term) > Online Search Data

Key Takeaway

Eagle Alpha’s US Unemployment index has a 5-year correlation of 0.9 with the US
Unemployment Rate, with an out-of-sample prediction improvement of 14% compared
with a baseline ARIMA model.

Dataset

Google Trends is a public web tool based on Google Search that shows how often a
particular search-term is entered relative to the total search-volume over time across
various regions of the world. There are several advantages to using search data as a
determinant of economic activity. The data is very timely, it has over 10 years of history,
it is unique and offers unparalleled flexibility in terms of the variety of issues that can be
analysed. The data is also generated as a by-product of people’s normal day-to-day
activity, as opposed to traditional survey methods which rely on individuals or firms
responding to survey questions after the event. This can avoid problems associated with
non-response or inaccurate responses.

Backtesting/Significance

Eagle Alpha data scientists and data insight analysts have invested three years into
finding the best way to use online search data to predict economic indicators. We have
devised our own proprietary methodology that leverages all relevant academic research,
as well as accepted best practices in the field.

Each index is built using a rigorous process: 1) generate relevant search terms; 2) source
the search volume for each term dating back to 2004; 3) clean the data and adjust for
outliers and seasonality; 4) search terms are ranked by their predictive scores; and 5) final
index includes a selected basket of terms, and measures co-movement of search activity
with a particular economic indicator. To obtain a detailed overview of our methodology
please contact us.

These indices are not designed to provide point estimates for macro investors, but instead
add value by improving the predictive power of clients’ estimation models.

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Case Study

Eagle Alpha’s US Unemployment Index (Figure 38) is a measure of online search activity
relating to the claiming of unemployment benefits. The index has a 5-year correlation of
0.9 with the US Unemployment Rate and testing shows an out-of-sample prediction
improvement of 14% over a baseline ARIMA model of unemployment over the same
period.

In January 2017, the index increased by 1.8 points. This is the largest MoM change since
August 2016. The 3 and 12-month moving averages mirror each other closely, which is
consistent with the US economy operating close to full employment.

Figure 38: EA US Unemployment Index vs. Unemployment Rate (US)

Sources: Eagle Alpha, Google, BLS, Bloomberg

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18. Macro > Discretionary (Long-Term) > Trade Nowcasting Data

Key Takeaway

Statistical backtesting has proven the indicators are frequently a better predictor than
street-mean estimates, while also having the advantage of substantial lead time.

Dataset

Trade nowcasting indicators provide valuable insights into international trade and
industrial production. Our data partner employs big data and predictive analytics
techniques, and more than 25,000 times series, to forecast trade balance and industrial
production statistics. The data is also available at the level of an individual shipping port,
and bespoke feeds can be provided.

Backtesting/Significance

Statistical backtesting has proven the indicators are frequently a better predictor than
street-mean estimates, while also having the advantage of substantial lead time. Over the
last 3 years, the indicators were better than street estimates in 67% of the time.

Case Study

Considering China’s trade balance, Figure 39 below shows monthly values from February
2014 onwards. Red dots show the trade nowcasting forecasts, while orange dashes
indicate street estimates.

In January 2017, it was reported that China’s trade remained sluggish in December 2016
with exports decreasing 6.1% YoY. Imports, on the other hand, increased by 3.1% YoY
vs. 6.7% YoY in November 2016.

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Figure 39: China’s Trade Balance

Source: Trade Nowcasting Indicators

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19. Macro > Discretionary (Long-Term) > Pricing Data

Key Takeaway

Online property listings data was used to research buy-to-rent investors which led to the
subsequent clamp down on mortgage lending.

Dataset

The case study below is based on an online property listings dataset that covers 80% of
UK sales. This dataset is more timely than any publicly available dataset. Our partner’s
data can be actionable in various ways, such as analysing property deal flow and volume,
tracking liquidity of the property market, tracking the liquidity and availability of secure
consumer credit, analyzing consumer confidence around envisaged indebtedness, and
advanced indicator of strength or weakness in housing related consumer discretionary
stocks as well as telecom and utilities.

Case Study

Bank of England analysts demonstrated their research in several papers: ‘How much do
investors pay for houses?’ (September 2015)20, ‘Five facts about buy-to-let’ (July 2015)21,
‘Chance favours the prepared mind’ (July 2015)22. These articles shed a light on the
Bank’s methodology and how various micro datasets were linked in order to gain valuable
insights into UK housing market trends.

Buy-to-rent investors – known as buy-to-let (BTL) in the UK – were becoming large players
in the UK housing market. Housing stock held for private renting went from 9% of the total
stock in 2000 to 19% in 2013 (Bracke, 2015). The Bank of England decided to investigate
whether BTL investors drove the housing prices up and could lead to macro instability.

Product Sales Data (PSD) provided by the Financial Conduct Authority was used to gather
details of loans for house purchases. The PSD data was then linked with Land Registry’s
Price Paid data and the online property listings dataset.

20 Source: ‘How much do investors pay for houses?’, September 2015

21 Source: ‘Five facts about buy-to-let’, July 2015

22Source: ‘Chance favours the prepared mind: What linked micro data can tell us about the housing market’, July
2015

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The combination of these datasets allowed the Bank of England to conduct a more precise
analysis and get closer to the understanding of the individual agents’ decision-making.
Some valuable insights are presented below.

A decrease in average time from listing to completion of a sale highlighted increased

purchasing activity.

Figure 40:Months from Listing to Completion

Sources: Online Property Listings Dataset, Land Registry Price Paid, ONS Postcode Directory

Buyers were able to negotiate and obtain 4-5% discounts in 2011-2012. However, the
analysis showed that buyers lost some of the bargaining power as the speed of
transactions increased. In London, the average discount even turned negative at one
point.

Figure 41: Discount from Last Asking Price

Sources: Online Property Listings Dataset, Land Registry Price Paid, ONS Postcode Directory

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The analysis of the micro linked data also revealed that BTL investors were able to secure
greater discounts compared to other buyers. They also preferred London properties, and
flats in particular.

Figure 42: Discount from Last Asking Price by Buyer Type

Sources: WhenFresh, Land Registry Price Paid, ONS Postcode Directory

Bracke (2015)23 concluded: “The data show that BTL investors can accelerate the time it
takes to sell a property, and BTL discounts are the implicit compensation for this
contribution. However, investors’ ability to `grease the wheels’ of the housing market
becomes limited when the market is already performing well. This is precisely when
financial stability concerns become most important.”

The Bank of England then used the above analysis to further investigate the mortgage-
financed part of the housing market as half of all BTL transactions were supported. It
then decided to take action and clamp down on BTL lending: “The PRA, the Bank’s
regulation arm, is concerned that changes to mortgage interest tax relief for landlords will
strain buy-to-let borrowers and that only a few lenders include this risk when assessing
mortgage applications.”

23 Source: ‘How much do investors pay for houses?’, September 2015

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20. Credit > Discretionary (Long-Term) > Credit Risk Data

Key Takeaway

Testing showed that the probability of bankruptcy within 12 months ranges from 10% to
50% when a company gets a stress score of “1”.

Dataset

Credit score data provider delivers predictive stress scores for credit, supply chain and
financial professionals. Credit ratings are prepared for over 57,000 public companies
worldwide and can be used to analyze equities with high bankruptcy risks.

Aggregate crowd-sourced usage data from the vendor’s subscribers, credit managers and
supply chain professionals from Fortune 1000 companies, is incorporated during the
construction of stress scores. The provider found distinct behavioural patterns when its
subscribers are concerned with certain companies and investigate them more closely.

Backtesting/Significance

Monthly credit scores have been proven to be highly accurate when predicting corporate
failures. Testing showed that the probability of bankruptcy within 12 months ranges from
9.99% to 50% when a company gets a score of “1”.

Case Study

On August 31st 2016, Hanjin Shipping, the world’s seventh-largest container carrier at the
time, filed for bankruptcy protection as it could not renegotiate its debts. On September
12th 2016, it was estimated that $14 billion worth of cargo was stuck aboard Hanjin ships
and the company lost a third of its market value in two weeks.

On 21st September 2016, the vendor published a case study with the post-filing analysis
of Hanjin Shipping’s bankruptcy. Figure 43 below shows that the credit score for Hanjing
dropped to “2” in December 2015 and “1” in February 2016 well in advance of the
bankruptcy filing.

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Figure 43: Monthly Average Credit Scores

Source: Credit Risk Data Provider

Disclaimer

This case study is directly from the vendor and Eagle Alpha has not backtested the data.

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Section 5: Overview of Eagle Alpha

Eagle Alpha was founded in 2012 with the sole focus of enabling asset managers to obtain
alpha from alternative data.

Since 2012 Eagle Alpha has built a product team that is modelled on similar teams of ‘data
factories’ at asset management firms. There are four groups that make up our product
team: 1) data sourcing professionals whose task is to hunt for and profile datasets; 2)
analysts with buyside and sellside experience that understand asset classes and
investigate strategies; 3) data scientists that have strong quantitative skills for backtesting
and data exploration; and 4) engineers to deliver our solution to clients.

Asset management clients include quantitative funds, discretionary hedge funds and
traditional mutual funds. We work with clients that are starting to integrate alternative data
into their investment process as well as the most sophisticated users of alternative data.
Our solution is focused on education (teach-ins and thought leadership) and alpha
(bespoke projects, data insights, analytical tools and data sourcing). Please see Figure
44 for summary information.

The most popular part of our offering is the Data Sourcing solution. It aggregates the best
third-party datasets worldwide (currently 515) and also our (quasi) proprietary and
proprietary datasets. See Section 6 (page 76) for more information.

We are a recognized leader in the alternative data space. We regularly host flagship
events on alternative data in New York, London and Hong Kong, we author some of the
most highly regarded content on the topic, and we have been heavily referenced in
alternative data primers by the largest investment banks in the world.

Our vision is to be the 'go-to' firm for the alternative data feeds of asset managers.

Subscribe to our free weekly newsletter for insights on the alternative data space. Learn
more at www.eaglealpha.com and follow on Twitter: www.twitter.com/dollareagle.

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Figure 44: Summary Information

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Section 6: Eagle Alpha’s Data Sourcing Solution

Introduction

S&P's "Big data in asset management" paper24 gave good context to data sourcing. It
stated "to generate differentiated insights, asset managers are competing aggressively to
secure access to unique big data (alternative data) sources...Given the diverse data
sources, asset managers must test and validate the sources. Asset managers should also
perform due diligence on data vendors and their sourcing methodologies and ensure that
there are no legal or privacy issues...In our survey, identifying the right data sources was
ranked as the biggest challenge by more than half of the respondents and among the top
two challenges by about three-fourth of the respondents".

Eagle Alpha's Data Sourcing solution is designed to address this challenge. Below we
highlight the specific challenges asset managers face regarding alternative data sourcing,
outline our solution, state how our solution is differentiated and why our clients license it.

Eagle Alpha's Solution & USPs

Our solution to these challenges has four components:

1. Online database. We have 5 employees dedicated to mapping ALL of the worlds

alternative datasets that we believe are of interest to asset managers. Currently there
are 515 datasets (as at 8th September 2017). The database is also available via API
for clients that have internal catalogues.

USP: our database has the largest number of alternative datasets and includes the
most comprehensive profiles available. Every week we improve the profiles through
100+ hours of phone calls with data vendors.

2. Advisory service. Our best client relationships are those where we have regular with
calls to discuss their data needs and provide tailored advice. 3 examples of typical
questions clients ask us:

a. Based on your 5 years of understanding of our investment strategy what datasets

must we prioritise for demos/trials?
b. If we send you a few specific research questions can you email us the most
appropriate datasets?
c. What interesting datasets are coming to market in Q4 2017?

24 Source: ‘Big Data in Asset Management’, April 2017

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 USP: our advisory service leverages our 5 years of experience working in the
alternative data space and the wider Eagle Alpha team. We are in a unique position to
advise clients given the five other parts of our offering. For example, our data insight
analysts publish actionable reports based on alternative datasets and we build
indicators based on alternative datasets.

3. Vendor Access. We connect clients with datasets exploring coming to market, datasets
doing roadshows through financial centres worldwide and organise events where
datasets pitch for your business.

USP: we host the best data showcase events worldwide. Our next event will have 50
datasets present to 180 asset managers. Please refer to Section 7 (page 79) for our
overview of our next event.

4. Proprietary Datasets. We give clients proprietary datasets which are obtained via web
crawling and indicators based on online search data.

USP: In October 2017 we will launch our first (quasi) proprietary dataset that is based
on data from a credit card dataset.

Why Clients License Our Data Sourcing Solution

We asked our clients why they purchase a license to our Data Sourcing solution:

• Delivering the database via a feed is a great way for us to complement our internal
catalogue.

• You now have 5 people focused on data hunting. We don't have the budget to hire a
data procurement team of that size.

• FOMO. You insure we don't miss out on the best datasets.

• As an aggregator you have unique insights into what datasets the market is looking at.

• Monthly advisory calls help us to prioritise which datasets to demo and potentially trial.

• We like to get a 'first look' at new datasets through your pilot fishing roadshows.

• Your data showcase events are the most efficient way for us to meet 50 high quality
data vendors in a single day.

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• Your knowledge of the latest pricing of hundreds of datasets can help save us time and
money.

Next Steps

If your firm is interested in a license of our Data Sourcing solution the next steps are:

1. Contact us to schedule a demo.

2. Email us with a description of your alternative data needs. At the end of the demo we
will suggest a solution of how alternative data can address these needs.

3. Following the demo we will send you a deck that outlines our Data Sourcing solution in
detail.

4. Decide if your firm wants to take a license. The price is $35,000 per annum for unlimited
users per license.

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Section 7: The BIG Alternative Data Showcase Event

Following Eagle Alpha's successful data showcase events in New York and London, we
are proud to announce the launch of the largest ever alternative data showcase event.

We are handpicking 50 alternative data vendors to pitch to 180 asset managers on

Tuesday 5th December 2017 in New York.

Figure 45: The BIG Alternative Data Showcase Event

Why Attend?

Professionals focused on the procurement of alternative datasets are booking tickets

because they:

• Don't want to miss out on meeting 50 of the best hand-picked alternative datasets.

• Like to see which other firms are attending.

• Are interested to listen to questions asked by their counterparts at other firms.

• Want to learn insights from a panel of data procurement professionals.

• Can schedule 1-on-1s, attend pre-event drinks and obtain detailed information on each
data vendor post event (clients only).

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How Does Eagle Alpha Select The 50 Alternative Data Vendors?

Our selection committee hand-picks data vendors based on the following principles:

• Avoid data vendors that are well known to the majority of the buyside.

• Pick data vendors that have recently come to market but are not yet well known.

• Select data vendors that have not yet pitched to any buyside firm.

• Include datasets where Eagle Alpha is the exclusive distributor.

• Pitch three of Eagle Alpha's (quasi) proprietary datasets.

• Present Eagle Alpha's proprietary datasets e.g. a google-based dataset that provides
signals for tickers.

• Consider datasets that are about to come to market.

• Ensure representation from several of the 24 categories of alternative data e.g.

consumer transactions and geo-location.

• Reserve slots for several data vendors from outside the US.

Please note that the names of the data vendors will not be disclosed prior to the event.
This is a similar policy to all our previous data showcase events in New York and
London.

Agenda:

Monday, December 4th:

• 1-on-1 meetings with data vendors at mutually agreed locations (exclusively for clients
of our Data Sourcing solution).

• Pre-event drinks reception at a venue in midtown with the 20 data vendors that will
present on Tuesday (exclusively for clients of our Data Sourcing solution).

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Tuesday, December 5th:

• 07.45am: Welcome, breakfast, 50 vendor exhibits.

• 08.30am: Introduction and 5 data vendor pitches (20 minutes each).

• 10.30am: Refreshments, 50 vendor exhibits.

• 11.00am: 6 data vendor pitches (20 minutes each).

• 1.00pm: Lunch, 50 vendor exhibits.

• 2.00pm: Panel of data procurement professionals moderated by Peter Greene, Vice

Chair of Lowenstein Sandler's Investment Management Group.

• 2.30pm: 6 data vendor pitches (20 minutes each).

• 4.30pm: Refreshments, 50 vendor exhibits.

• 5.00pm: 3 data vendor pitches (20 minutes each).

• 6.00pm: Cocktail reception with data vendors.

Post Event:

• Obtain, for each of the 50 datasets, an Eagle Alpha tear sheet, a recorded
demo/webinar, case studies and testing results. In addition, we will provide audio
recordings of the 20 data vendors that presented. The post-event material is only
available to clients of our Data Sourcing solution.

• Eagle Alpha will coordinate trials of datasets (clients are prioritised).

Ticket Prices

Attendance is capped at 180 places. In order to secure your place please book early.
Prices:

• Clients of Eagle Alpha's Data Sourcing package receive two complimentary passes.

• Super early bird rate - available until Friday, 15th September 2017: $1,499.

• Early bird rate - available until Friday, 13th October 2017: $1,749.

• Standard rate - available until capacity is reached: $1,999.

This is a must attend event for anyone interested in alternative data. Contact us to learn
more. Please note that only asset managers are permitted to attend.
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Data beats opinion

enquiries@eaglealpha.com

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