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Twitter and Stock Market predictions

08.04.2011

Traders are constantly looking for ways of action to find out what the market wants that is where he's headed to the small differences that could make. In this sense, traders follow a number of unrelated factors, such as for example weather reports and the like, to increase their chances and accuracy of forecasting market trends.

It is probably not surprising that traders on the stock market today, trying to follow conversations on large social networks such as Twitter in order to obtain information that what stocks are more or less popular.
Does this really work in practice? German PhD student Timm Sprenger, says his analysis shows that the thing works. To put their findings to the test set up a website TweetTrader.net, which monitors the actions and messages to Twitter.

The idea behind Twitter-tracking is that if one million people speak (write) about things he likes or dislikes, no matter whether they are movies, books, food, celebrities, then there is a certain percentage of these messages related to SE.
Since the introduction of "sentiment indicator", which is engaged in many research firm working for the broker market and the compiling economic analysis, theories and comments provided by economists, investors, the owners of shares in real time and the (monitoring and analysis of messages on Twitter) gives similar type of information.

According Sprenger's research, ranking sentiment that his system got from tweets, followed 500 stock index was approximately correct, and the possibility of in to foresee what the market one day in advance. Studies show that investors who have traded on the stock market using Sprenger study had an average profit of 15%.
Last year researchers at the University of Manchester and Indiana University have published another study that gives the predicted value obtained from the research being on the Twitter messages and comparing it with the Dow Jones Industrial Average index, given the accuracy of 87%.

There are similar ideas and business startup projects, such as StockTwits.com and similar.

It should be noted that this approach is not without risk because the Twitter is open system, with which one can play to promote specific actions, similar to what happened on the message boards in the early days of Web-based investment (eg Google search for SEO engineers). Anyone who is planning such an approach to trade stocks must all take this into account.



Posted by: Dejan Petrovic