Growth5 Blog

Wednesday, October 20, 2010

Can the Twitter Mood Predict the Stock Market?

According to this article, the overall mood on Twitter can predict how the stock market is going to move in the following two to six days.

Unfortunately, the two to six day time horizon is a bit too long to predict exactly when these shifts are going to take place, but it's an interesting study. Here are the highlights:
1. "The report (pdf), authored by Johan Bollen, Huina Mao and Xiao-Jun Zeng, says that the degree of "calmness" of the Twitterverse can predict -- with 87.6 percent accuracy -- how the Dow Jones Industrial Average will move, two to six days before the movements occur."

2. The researchers examined two existing Twitter mood tracking tools: OpinionFinder and Google-Profile of Mood States.

3. Researchers were surprised that it was "calmness," not positive/negative moods, that ended up being the better predictor of future market conditions. The researchers say their findings "offer no information on the causative mechanisms that may connect public mood states with DJIA values in this manner." While "calmness" might predict market movements, it doesn't necessarily cause them.
Sean Carton forwarded this article to me. In his email he asked, "so will people now start trying to "pump and dump" the Twitterverse? :)"

Or most certainly "short and distort" it.

Thanks Sean!

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2 Comments:

At March 29, 2011 at 8:20 AM , Blogger Option tips said...

It was a awe-inspiring post and it has a significant meaning and thanks for sharing the information.Would love to read your next post too......
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At July 12, 2011 at 9:18 AM , Blogger MichelHerbert said...

Awesome one. Keep it up good work.

 

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