Does Alternative Data Improve Financial Forecasting? The Horizon Effect

65 Pages Posted: 17 Nov 2020 Last revised: 10 Feb 2021

See all articles by Olivier Dessaint

Olivier Dessaint


Thierry Foucault

HEC Paris - Finance Department

Laurent Frésard

Universita della Svizzera italiana (USI Lugano); Swiss Finance Institute

Multiple version iconThere are 2 versions of this paper

Date Written: February 5, 2021


We analyze the effect of alternative data on the informativeness of financial forecasts. Our starting hypothesis is that the emergence of alternative data reduces the cost of obtaining information about firms' short-term cash-flows more than their long-term cash-flows. If correct, and forecasting short-term and long-term cash-flows are distinct tasks, analysts will reduce effort to process long-term information when alternative data becomes available. Alternative data thus makes long-term forecasts less informative, while increasing the informativeness of short-term forecasts. We confirm this prediction using variations in analysts' exposure to social media data and a new measure of forecast informativeness at various horizons.

Keywords: Big data, Financial analysts' forecasts, Forecasting horizon, Forecasts' informativeness, Social media

JEL Classification: D84, G14, G17, M41

Suggested Citation

Dessaint, Olivier and Foucault, Thierry and Frésard, Laurent, Does Alternative Data Improve Financial Forecasting? The Horizon Effect (February 5, 2021). HEC Paris Research Paper No. FIN-2020-1402, Swiss Finance Institute Research Paper No. 20-106, Available at SSRN: or

Olivier Dessaint


Boulevard de Constance
77305 Fontainebleau Cedex

Thierry Foucault

HEC Paris - Finance Department ( email )

1 rue de la Liberation
Jouy-en-Josas Cedex, 78351
(33)139679569 (Phone)
(33)139677085 (Fax)


Laurent Frésard (Contact Author)

Universita della Svizzera italiana (USI Lugano) ( email )

Swiss Finance Institute ( email )

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4

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