September 12, 2011

Twitter becomes latest tool for hedge fund managers

The hedge fund Derwent Capital Markets has started to use Twitter to forecast the direction the market. They collect tweets and analyze if the tweets are positive or negative. Are people happy, sad, anxious or tired? Their software takes a random 10% of all Twitter feeds and uses two methods to collate the data:
  1. Compare positive with negative comments 
  2. Define six moods calm, alert, sure, vital, kind and happy 

"...we realized it was the other way round — that a drop in the mood or sentiment of the online community would precede a fall in the market. It meant we could predict the change in the market and that gives you a considerable edge." 

This is similar to the art project "We feel fine" by Jonathan Harris where you can see the feelings of the world.

If you want to create your own version you can use this Twitter Streaming API developed by 140dev

Source: The Telegraph