Valuing Financial Data

How should an investor value financial data? The answer is complicated as it not only depends on the investor himself, but also on the characteristics of all other investors. Portfolio size, risk aversions, trading horizon, and investment style affect an investor's willingness to pay for data and the equilibrium value of data. Directly measuring all these characteristics of all investors is hopeless. Thus, we outline a simple model that gives rise to sufficient statistics that make an investor's private value of data measurable. Our approach can value data that is public or private, about one or many assets, relevant for dividends or for sentiment. We find that investor characteristics always matter. What tempers the heterogeneity in how investors value data is market illiquidity. When investors' trades move prices, the value of data falls, especially for the investors who value data most. The high sensitivity of the value of data to market liquidity, for high-data investors, suggests that modest fluctuations in market liquidity can eviscerate the value of financial firms whose main asset is financial data.