Wall Street too turning to Twitter for stock market predictions
May 5th, 2011 - 1:54 pm ICT by ANILondon, May 05 (ANI): To gain a trading edge, Wall Street too is now turning to Twitter and other social media to wring useful intelligence out of the words, opinions, rants and even smiley faces posted on it.
An Indiana University professor has suggested that Twitter may be a goldmine of valuable financial information.
A new paper published by Johan Bollen, a professor of informatics at Indiana, combined with recent practices on Wall Street, linked a computerized assessment of the “mood” of millions of Twitter posts with stock market performance.
Bollen’s analysis of Tweets was said to have an 87 per cent chance of successfully predicting stock prices within three or four days of online discussion of the company in question.
To reach his conclusion, Bollen analyzed a total of 9.6 million tweets over nine months in 2008, using two mood-tracking tools.
One program assessed whether a tweet about a particular company was positive or negative, while the other tried to drill down further and categorize tweets through six modifiers: calm, alert, sure, vital, kind and happy.
“If you would have told anyone 10 years ago that this data would be available, they would have called it science-fiction,” the Daily Mail quoted
Bollen as telling USA Today.
“We know that emotions play a significant role in markets,” Bollen added.
Bollen added that the process of analyzing millions of tweets is akin to a “large-scale emotional thermometer for society as a whole”.
USA Today wrote: “This incoming psychological snapshot of the Twitterati, digerati and average Joe could prompt a computer program interpreting the data at a hedge fund to place a trade without human intervention in an attempt to profit from the information”.
In fact, some financial companies are already incorporating analysis of Twitter and other social media into their decision-making strategies. (ANI)
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