MoneyTalk

 

A Tweet Way To Predict Market Movements

28 March 2011
In this week’s episode:

Is the fluctuating mood state of the Twitterati correlated to the Dow Jones Industrial Average? David Kuo is joined by Paul Hawtin of Derwent Capital and Johan Bollen of Indiana University who analyse key words on the social media site to predict stock market movements. They reckon they can predict the direction of the Dow three or four days in advance with an accuracy of 86%.

 

A transcript of this podcast is also available.

David and Paul Hawtin
David and Paul Hawtin

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Comments

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rober00 28 Mar 2011 , 5:16pm

If this is true and I reckon it is a big "IF" then as with all such "systems" this one will very soon be negated by investor action.

Like all such university research in the USA its biggest impact, no doubt, will be to keep its proponent in his college job for another year.

TMFDragon 29 Mar 2011 , 9:52am

Hi rober00

I’m pretty sure it is true. Here is a link to an archived reprint of Johan Bollen’s paper, which was co-authored by Huina Mao and Xiao-Jun Zeng.

http://arxiv.org/PS_cache/arxiv/pdf/1010/1010.3003v1.pdf

I nevertheless share your cynicism. Can something so elegantly simple be so pleasingly effective?

It’s an interesting point you have raised as to whether the trading system could be negated by investor action. I would have thought, if anything, the effect could be amplified when more people buy into the idea.

Best

David

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MoneyTalk is a podcast from The Motley Fool (UK). Hosted by David Kuo, it’s a lively roundtable discussion where Fool writers and guests from the world of money thrash out the financial issues of the day.

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David Kuo is The Motley Fool’s media personality. He can be heard on BBC London’s (94.9FM) Breakfast Show where he arouses listeners every weekday morning with his unique brand of financial news. He is also a regular commentator on national news programmes including CNBC, BBC News, and Sky News.

David stumbled into the world of broadcasting at the turn of the Millennium when he was invited to comment on the stock market crash. He says, “I think I stunned Londoners speechless when I said the good thing about the crash is that shares are now more affordable for people who want to invest in the stock market!”

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