Study: Twitter Predicts Stock Prices More Accurately Than Any Investment Tactic

Study: Twitter Predicts Stock Prices More Accurately Than Any Investment Tactic
Market News
Like Us On Facebook
Like Us On Facebook

Want to predict what will happen in the stock market tomorrow? Just use Twitter, say Californian researchers. A team at the University of California has created a computer model which allows them to ‘predict the future’ of the stock market by scanning the social network. 

It has up to 11 per cent more accuracy than other computer models.

The software looks at volumes of Tweets containing references to companies or products, and how they link to Tweets on other subjects.

It can predict both the volume of trading and the value of a stock the next day.

The discovery could have a huge impact on investors.

The team from the University of California have built a model which they claim could have a huge impact on investors by using the data to help predict the traded volume and value of a stock the following day.

During a four-month test the model did better than the Dow Jones Industrial Average and outperformed other baseline strategies by between 1.4 percent and almost 11 percent.

Professor Vagelis Hristidis, who specialises in data mining research which focuses on discovering patterns in large data sets, worked on the model. He said: ‘These findings have the potential to have a big impact on market investors.

‘With so much data available from social media, many investors are looking to sort it out and profit from it.’

The team studied how activity in Twitter is correlated to stock prices and traded volume. 


While past research has looked the sentiment, positive or negative, of tweets to predict stock price, little research has focused on the volume of tweets and the ways that tweets are linked to other tweets, topics or users. 

Past work has also mostly studied the overall stock market indexes, and not individual stocks.

For the latest study the researchers obtained the daily closing price and the number of trades for 150 randomly selected companies in the S&P 500 Index for the first half of 2010.

Then, they developed filters to select only relevant tweets for those companies during that time period. For example, if they were looking at Apple, they excluded tweets that focused on the fruit.

They expected to find the number of trades was correlated with the number of tweets. 


But the number of trades is slightly more correlated with the number of ‘connected components’ – the number of posts about distinct topics related to one company.

For example, using Apple, there might be separate networks of posts regarding Apple’s new CEO, a new product it released and its latest earnings report. 

They also found stock price is slightly correlated with the number of connected components.

For the study, the researchers simulated a series of investments between March 1, 2010 and June 30, 2010 and analyzed performance using several investment strategies. During that time frame, the Dow Jones Industrial Average fell 4.2 percent.

The model the researchers developed using Twitter data lost on average 2.4 percent.

But Professor Hristidis noted several potential weaknesses in the study including that the trading strategy worked in a period when the Dow Jones dropped, but it may not produce the same results when the Dow Jones is rising. 


There is also sensitivity related to the duration of the trading. For example, it took 30 days in the simulation to start outperforming the Dow Jones.

Elite.

Share Tweet
React
Like Us On Facebook
Like Us On Facebook

Preston Waters

Preston Waters is a thinker. He's not your traditional philosophical persona, however, as he leaves no topic untouched. Covering all the bases, from business to women, Preston Waters is the ultimate man's man for Gen-Y.

More In Market News

News Preston Waters

Stocks Off to Stellar Start in May

Stocks were kicking off May in high style Tuesday, posting sharp gains after a much better-than-expected report on U.S. manufacturing activity. The Dow Jones Industrial Average was rising 103 points, or 0.8%, at 13,317, after hitting a four-year high at 13,338. The S&P 500 was up 14 points, or 1%, at 1413, and the Nasdaq was adding 23 points, or 0.7%, at […]

News Preston Waters

Bank Of America, JPMorgan: Dow Midday Movers

U.S. stocks were rising in midday action Tuesday following a better-than-expected read on U.S. manufacturing activity.The Dow Jones Industrial Average was up more than 116 points, or 0.9%, at 13,330. The biggest percentage gainers within the Dow were Bank of America (BAC), JPMorgan Chase (JPM) and Intel (INTC). Shares of Bank of America rose 2.59% to $8.32. The bank said Tuesday it plans to lay […]

News Preston Waters

Monster Stocks Soar Amid Rumors Coca-Cola Is Set To Buy Energy Drink

Monster Beverage Corp’s shares soared on Monday following a report that Coca-Cola Co. was considering buying the energy drink maker. The Wall Street Journal cited unnamed people in reporting that the world’s biggest soft drink maker was in talks to buy Monster. If a deal transpired, Monster would be Coca-Cola’s largest brand acquisition ever. Monster declined […]

News Preston Waters

Stocks Surge After Strong Manufacturing Report

Stocks were surging in morning action Tuesday after a much better-than-expected report on the pace of national manufacturing activity in April.The Dow Jones Industrial Average was rising 80 points, or 0.6%, at 13,294. The S&P 500 was up 12 points, or 0.8%, at 1410, and the Nasdaq was adding 29 points, or 1%, at 3075. Stocks finished modestly lower Monday, marking […]

News Preston Waters

Bank Of America Keeps Shrinking

Bank of America (BAC)’s plan to lay off some of its highest-paid executives looks like the right response to the current banking environment. The Wall Street Journal reported Tuesday the bank will cut 2,000 positions in its investment banking, commercial banking and non-U.S. wealth-management units targeting “the high-earning employees whose efforts helped Merrill Lynch account for the bulk of […]

News Preston Waters

Stock Market Story: May 1

The first trading day of May got off to a mixed start early Tuesday with all three major U.S. equity indices honing to close to the flat line ahead of a key report on the pace of U.S. manufacturing activity in April. The Dow Jones Industrial Average was down 9.5 points, or 0.07%, at 13,204.The S&P 500 was up less than a […]

Also On Elite

World

10-Year-Old Boy Dies Fighting As Islamic State’s Youngest Member (Photos)

The Islamic State and its supporters are sharing photos online to pay tribute to a 10-year-old boy who gave his life in battle. Described as the group’s youngest member, the photographs say that he had the honor of dying for the group along with his father. The two were killed in Syria at some point […]

Entertainment

All 90s Girls Will Love This Cover Of The Spice Girls’ ‘Wannabe’ (Video)

Rebecca Zamolo, the YouTube sensation who brought us the epic “I’m So Married” parody, is back again with another great video. This time, Zamolo, aka Baby Spice, joins a female crew comprised of Ana Free as Posh, Julia Price as Sporty, Maria Zouroudis as Ginger and lastly, Tanya Chisholm as Scary. The group covered every 90s girl’s favorite song, […]

Envision

2-Year-Old Girl Befriends Giant Bulls That Tower Over Her (Photos)

Jacqui Nightscales, a portrait photographer, caught a rare and beautiful moment on assignment recently when she was photographing 2-year-old Tatum. Nightscales, based in Dubai, caught the little girl connecting with a herd of giant Brahman bulls. The beautiful images show the animals towering over the tiny blonde girl. In some, she’s petting the animals, and […]

Envision

Photographer Somehow Manages To Shoot 24 Sunsets In A Single Day From An Airplane

If someone told you to “chase the sun,” the first thing that’d come to your mind would probably be something like “that’s damn near impossible.” However, when Citizen approached England-based photographer Simon Roberts and asked him to literally race against time and chase the sun around the world, he didn’t back down. He made it possible! […]

Women

Agent Provocateur’s House Rules Campaign Is Super Sexy And Scandalous (Video)

Agent Provocateur is a British lingerie company. It makes sexy lingerie and even sexier commercials. Case in point: its latest ad. The spot features a ton of great looking blonde beauties walking around in nothing but sheer lingerie. Sure, it’s pure objectification. And sure, you’re all probably chomping at the bit to call me a […]