Who needs a broker? Twitter comment analysis predicts great investments

Forget about insider trading. Use Twitter.

German economists who used machine intelligence to analyze tweets about stocks say the advice shared among Twitter members can accurately predicts what the market will do a day ahead of time.

The key is to pick the right group to listen to among all those tossing out comments about stocks via Twitter, says a research headed by Timm Sprenger, an economist at the Technical University of Munich who is founder of tweettrader.net, a website that analyzes and aggregates relevant tweets.

SOCIAL NETWORK DANGER: Attackers favor social-networking sites, shortened URLs

Their contention is that the stock market efficiently aggregates information and opinions in stocks that are reflected in stock prices and trading volumes. They say proper analysis of tweets about stocks can do the same but a day ahead of the market. They found their results so compelling that they've created the website.

Financial professionals could use this type of analysis to figure out what tweeted information reflects actual investor behavior, the researchers say.

Using Web crawlers plugged into Twitter's API to find mention of S&P 100 stocks, the team used open source Weka software to automatically read and analyze the tweets they gathered, classifying them as buy, hold or sell. It turned out about half were hold, about 35% were buy and about 15% were sell.

They took into account how many times comments were retweeted, how many times they were mentioned by other Twitter members and how many followers individual tweeters had -- all as a way to give weight to individual tweets that are in line with their influence in the Twitter community.

Overall, the most respected tweets are those that get the most mention or are retweeted the most, the researchers say. "Users who provide above average investment advice are retweeted (i.e., quoted) more often, have more followers and are thus given a greater share of voice in microblogging forums," they say in their research paper on the subject.

They looked at 249,533 tweets about stocks listed on the S&P 100 and found a strong correlation between trading volume for a particular stock and the number of tweets that mention it.

The researchers found that tweeters offered up opinions contrary to what the market is currently doing and that the number of tweets about a particular stock is a good prediction of how many shares of it will be traded the next day.

The team looked at financial tweets between Jan. 1 and June 30, 2010.

Read more about lans and routers in Network World's LANs & Routers section.

Join the newsletter!

Or

Sign up to gain exclusive access to email subscriptions, event invitations, competitions, giveaways, and much more.

Membership is free, and your security and privacy remain protected. View our privacy policy before signing up.

Error: Please check your email address.

Tags social mediainternetunified communicationsNetworkingtwittersoftwareapplicationsfinanceWeb 2.0industry verticalsInternet-based applications and servicesUniversity of Munich

Keep up with the latest tech news, reviews and previews by subscribing to the Good Gear Guide newsletter.
Tim Greene

Tim Greene

Network World
Show Comments

Cool Tech

Bang and Olufsen Beosound Stage - Dolby Atmos Soundbar

Learn more >

Toys for Boys

Sony WF-1000XM3 Wireless Noise Cancelling Headphones

Learn more >

Nakamichi Delta 100 3-Way Hi Fi Speaker System

Learn more >

ASUS ROG, ACRONYM partner for Special Edition Zephyrus G14

Learn more >

Family Friendly

Mario Kart Live: Home Circuit for Nintendo Switch

Learn more >

Philips Sonicare Diamond Clean 9000 Toothbrush

Learn more >

Stocking Stuffer

Teac 7 inch Swivel Screen Portable DVD Player

Learn more >

SunnyBunny Snowflakes 20 LED Solar Powered Fairy String

Learn more >

Christmas Gift Guide

Click for more ›

Brand Post

Most Popular Reviews

Latest Articles

Resources

PCW Evaluation Team

Tom Pope

Dynabook Portégé X30L-G

Ultimately this laptop has achieved everything I would hope for in a laptop for work, while fitting that into a form factor and weight that is remarkable.

Tom Sellers

MSI P65

This smart laptop was enjoyable to use and great to work on – creating content was super simple.

Lolita Wang

MSI GT76

It really doesn’t get more “gaming laptop” than this.

Jack Jeffries

MSI GS75

As the Maserati or BMW of laptops, it would fit perfectly in the hands of a professional needing firepower under the hood, sophistication and class on the surface, and gaming prowess (sports mode if you will) in between.

Taylor Carr

MSI PS63

The MSI PS63 is an amazing laptop and I would definitely consider buying one in the future.

Christopher Low

Brother RJ-4230B

This small mobile printer is exactly what I need for invoicing and other jobs such as sending fellow tradesman details or step-by-step instructions that I can easily print off from my phone or the Web.

Featured Content

Product Launch Showcase

Don’t have an account? Sign up here

Don't have an account? Sign up now

Forgot password?