Big data analytics and investment

Big data has found extensive applications in various industries, including finance. It is an essential tool for investors to make high-stakes investment decisions. Using China’s A-shares Market, this paper employs 76 firm characteristics to conduct descriptive analytics (factor model) and predictive analytics (long–short portfolio) through an Instrumented Principal Component Analysis (IPCA) model. According to our results, the IPCA model outperforms in both description (tangency portfolio Sharpe ratio of 2.91) and forecasting (long–short portfolio Sharpe ratio of 2.38). Moreover, our paper compares the performance of different sets of characteristics in big data analytics and concludes that sentiment is dominant, while fundamental analysis is also important. Our results can provide policymakers with valuable insights into the common trends of the stock market and assist investors in making effective investment decisions. •Big data is useful for investors in China’s A-shares market to make investment decisions.•We conduct descriptive and predictive analytics through IPCA model with 76 firm characteristics.•The model outperforms with Sharpe ratios: Tangency portfolio 2.91, Long-Short portfolio 2.38.•Sentiment is dominant while fundamental analysis is also important in China.•We provide policymakers and investors with valuable insights.