Alternative datasets are generated by many sources but can be classified at a high-level as predominantly produced by:

• Individuals who post on social media, review products, or use search engines
  
• Businesses that record commercial transactions, in particular, credit card payments, or capture supply-chain activity as intermediaries
  
• Sensors that, among many other things, capture economic activity through images such as satellites or security cameras, or through movement patterns such as cell phone towers

The nature of alternative data continues to evolve rapidly as new data sources become available while sources previously labeled alternative become part of the mainstream. The Baltic Dry Index (BDI), for instance, assembles data from several hundred shipping companies to approximate the supply/demand of dry bulk carriers and is now available on the Bloomberg Terminal.

Alternative data includes raw data as well as data that is aggregated or has been processed in some form to add value. For instance, some providers aim to extract tradeable signals, such as sentiment scores. We will address the various types of providers in Chapter 4, Alpha Factor Research.

Alternative data sources differ in crucial respects that determine their value or signal content for algorithmic trading strategies. We will address these aspects in the next section on Evaluating alternative datasets.