Fund managers combined quant factors with fundamental analysis and alternative data and just like that a new buzzword—Quantamental Investing—is born.

Raghav Bharadwaj filed this report on the rising use of quantamental analysis for Emerj:

Investors and financial advisors have relied on the existing information they have about stocks and company performance from SEC filings. The investment divisions of large banks or independent hedge funds have also had access to information regarding macroeconomic factors such as economic indicators and market conditions and microeconomic factors financial conditions and assessing the performance of company’s management team.

As smartphones and devices multiply, cameras and other sensors boom, and organizations increasingly ground their business processes in data, new kinds of analysis are opening up for traders and investors to make more informed decisions about the world – beyond traditional data sources like stock price activity or earnings reports.

Quantamental investing is a term that is now being used to describe a combination of these methods on different data sets to improve on the accuracy of predicting outcomes – such as stock prices or a company (or country)’s financial performance.

[…]

Examples of using “alternative” data include:

  • Using natural language processing for sentiment analysis of a financial institution’s Twitter channel or
  • Using image processing on satellite imagery of parking lots and correlating that with sales for certain retail firms.

These kinds of analysis would be entirely impossible without the proliferation of new data sources, and the development of new AI methods. The big difference here from traditional quantitative investing lies in the type of data being analyzed. In the latter, AI systems are being used on alternative data. This usually refers to information such as social media data, geolocational data, satellite imagery, email receipt data, credit card purchases, website traffic or app purchases – any information that is not taken from SEC or equivalent filings.