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Twitter For Decision Making

Most people know my opinion about twitter – it is the intellectual equivalent of yelling things from a moving car. As such this attempt to to use twitter to track market sentiment doesnt thrill me too much. As an old stats tutor used to constantly drum into our not very bright heads – correlation does not equal causation

THE trend is your friend, as they say on Wall Street. But when it comes to financial decisions, can you trust a Twitter trend? Possibly: an analysis of sentiments expressed on Twitter appears to have given the small London-based firm Derwent Capital Markets an edge.
Derwent’s 25 million fund finished its first month of trading in July with a return of 1.85 per cent. By contrast, the Standard & Poor’s 500 financial index fell 2.2 per cent and the average hedge fund made only 0.76 per cent.
Beginner’s luck? Perhaps. Or maybe the tweets are helping. Derwent’s system tracks emotions expressed across 10 per cent of the roughly 100 million daily tweets using algorithms devised by Johan Bollen, a computer scientist at Indiana University Bloomington. It then uses this information to predict changes in the stock market.
In a study published last year, Bollen’s algorithms predicted the direction of the daily swing of the Dow Jones closing price with 87.6 per cent accuracy. The index consistently rose a few days after a period of “calm” tweets and dipped a few days after a period of “anxious” tweets (arxiv.org/abs/1010.3003).

From New Scientist

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Comments

  1. I’m obviously getting old – the whole twitter, facebook iamthecentreoftheworld thing leaves me cold. I have no interest in splatting out my “stream of consciousness” or in reading 99.9999999% of the crap that’s on the net or looking at millions of badly taken photographs of dumb people with dumb faces.

    I also don’t own a mobile phone (or is that a mobile communications device?) I can’t be bothered being called all the time and I certainly don’t want to call other people all the time and I can’t see the point of texting when you have a working phone in your hand

    I’m only 52 and one of my qualifications is as a computer programmer (in Java NOT COBOL you cheeky young pups) so I’m not a technophobe – ergo I’m obviously I’m past it – might as well break out the euthanasia pack

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