Let Lady Gaga, Kim Kardashian, And Millions Of Strangers Tell You How They Feel About The Stock Market

If you work at a big bank you probably don’t have access to much in the way of social media at work, which makes sense, since you would probably use Facebook mostly to insider trade and Twitter to prank the Compton sheriff’s department or tweet fake elevator conversations.

But now you have a better excuse for condensing your market research into 140-character:

A hedge fund that uses Twitter data to drive its trading strategy returned 1.85% in its first month of trading, according to an investor in the fund, in the first sign that social media data can be used successfully to enhance electronic trading techniques.

Derwent Capital, which finished its first month of trading at the end of July, beat the S&P 500 which fell 2.2% in July, while the average hedge fund made 0.76%, according to Hedge Fund Research.

The fund, which declined to comment, uses sentiment data mined from millions of Twitter messages, or ‘tweets’, to predict market movements. The strategy is based on research published by the University of Manchester and Indiana University in October which demonstrated that the number of emotional words on Twitter could be used to predict daily moves in the Dow Jones Industrial Average.

The Twitter strategy is based on a paper (pdf) by three computer scientists that found that indicators of “calmness” in tweets predicted movements in the Dow 3 – 4 days later. It’s one of several recent papers tracking public mood and the stock markets – another found that business articles in newspapers all use the same wording in the run-up to the bursting of stock market bubbles.

We know at least one stat arb fund that was looking into using Twitter as a signal in their trading model well before this paper came out. But they didn’t announce it publicly. Relying on the calmness, or lack thereof, of a million Justin Bieber fans to time your stock purchases seems like the sort of strategy whose excess returns will pretty quickly dissipate. If Derwent is buying stocks 3 days before they go up because Twitter tells them to, and their results are robust and announced in the press and their method is described in published papers, then it seems likely that others will pile in until Twitter calmness no longer provides a useful signal.

On a related note, we just saw an interview that Ed Thorp – who invented, among other things, card counting, convertible arbitrage, and maybe the Black-Scholes formula, so he’s worth listening to – gave to The Journal of Investment Consulting earlier this year (recently posted online, via Infectious Greed):

Meir Statman: I wonder if you would speak about the difference between the reward system of the academic world and the world of money management. I don’t know if there’s some wistfulness that I hear in your voice about the fact that you made money but never received the recognition that should have accompanied your intellectual accomplishments.

Edward Thorp: I realized in retrospect that there was no chance I was going to get any recognition for an options formula because I was not part of the economic academic community, and that was extremely important. … To me, the thing to do seemed to be to protect my investors and their interests and do theh best I could for them and just stay ahead in research as well as I could. So that’s what I focused on. If you don’t publish, you’re not going to get credit.

Geoff Gerber: But you were able to make money for your clients?

Edward Thorp: Yes. There was sort of a branch point. If I had been brought up in the traditional economic academic community, then I think that I would have gone the “get credit” route and probably succeeded in doing that. But I didn’t come up that way, so I went toward practical application.

Which worked out okay for him.

Twitter Hedge Fund Beats Market [Financial News]

(hidden for your protection)
Show all comments

94 Responses to “Let Lady Gaga, Kim Kardashian, And Millions Of Strangers Tell You How They Feel About The Stock Market”

  1. suckmesideways says:

    matt, all new posts of yours should be limited to 140 characters or less

    -guy who's sick of reading this shit

  2. Guest says:

    Don't worry, just wait until UBS jumps on this bandwagon. That's when you'll know it's officially dead.

  3. Future CFA Level 2 says:

    "into 140-character:"

    for shame matt

  4. guest says:

    Love ET but hopefully he doesn’t believe his own BS. F. Black was likewise not an academic, hence, NPC waited until he died to award the prize to S & M. For a paper in which they gave clear credit to ET.

    — IG, posting semi-invisibly

  5. Guest says:

    Look, Mom! No Charts!

    – Matt

  6. JJTON says:

    What a dumb f7cking article.

  7. TV Kid says:

    Wasn't Derwent the husband to the hot witch-wife Samantha on Bewitched? You know, the idiot who wouldn't let her use per powers and forced them to live in a crappy ranch across the street from the dried up hag Gladys Kravitz, mother to Lenny Kravitz, I think. Jeebus, what I would have done to her and Jeanie! I might have some of the deatil wrong but you get the idea. By the way, Maryanne was much hotter than that ho Ginger.

  8. shabbychef says:

    The Twitter paper has been thoroughly debunked:… ;
    And Derwent is now peddling sentiment to the masses, after failing as a hedge fund.

  9. qaQthd Thanks a lot for the blog.Thanks Again.

  10. Thanks for sharing, this is a fantastic article post. Keep writing.

  11. I cannot thank you enough for the blog.Really looking forward to read more.

  12. Thank you for your blog.Really looking forward to read more. Will read on…

  13. Great, thanks for sharing this article.Thanks Again. Keep writing.

  14. Sarah Shea says:

    Thanks for the article.Much thanks again. Really Cool.

  15. Really informative blog article.Really thank you! Great.

  16. I really like and appreciate your blog.Really looking forward to read more.

  17. 500 fastcash says:

    Im obliged for the article.Really looking forward to read more. Much obliged.

  18. I cannot thank you enough for the article.Really thank you! Great.

  19. PTFE says:

    Hello. the blog is good. [url=]PTFE[/url]

  20. youtube says:

    Enjoyed every bit of your post.Thanks Again.

  21. diamant says:

    Major thanks for the post.Much thanks again. Much obliged.

  22. A round of applause for your article.Much thanks again. Keep writing.

  23. Great, thanks for sharing this post.Much thanks again. Great.

  24. I seriously liked your submit.Seriously thank you! Want additional.

  25. I really enjoy the blog.Really thank you! Really Great.

  26. click here says:

    Very good post. Cool.

  27. Thank you ever so for you blog.Really looking forward to read more. Fantastic.

  28. Anestop says:

    I truly appreciate this blog post.Much thanks again. Keep writing.

  29. Very neat blog post.Really looking forward to read more. Cool.

  30. Really appreciate you sharing this blog.Really looking forward to read more. Really Cool.

  31. I truly appreciate this blog article.Really thank you! Want more.

  32. bed frames says:

    Say, you got a nice blog article.Much thanks again. Want more.

  33. Pam Keiffer says:

    Most likely assemble in brute drive detection and connect it to some loud horns or one thing to act as an alarm.

  34. Appreciate you sharing, great blog post.Really thank you! Really Cool.

  35. Look Here says:

    Extremely excellent tips. Fortunate me I reach on your internet site by accident, I bookmarked. I definitely like your web web site

  36. Solavei says:

    Really enjoyed this post.Really thank you! Much obliged.

  37. I truly like the clean perpective you did about the concern. Truly was not expecting that when I began off studying. Your concepts had been simple to understand that I wondered why I in no way looked at it before. Glad to know that there’s an individual out there that certainly understands what he’s discussing. Great job.

  38. says:

    Thanks for the article post.Thanks Again. Cool.

  39. Just wish to say your article is as astonishing. The clearness in your post is simply spectacular and i could assume you’re an expert on this subject. Well with your permission allow me to grab your feed to keep up to date with forthcoming post. Thanks a million and please continue the enjoyable work.

  40. Thanks , I have just been looking for information about this subject for ages and yours is the greatest I’ve discovered till now. But, what about the conclusion? Are you sure about the source?

  41. I was vastly delighted to locate this site resting on yahoo.I sought after to declare recognition to you with regard to this vast read!! I surelyenjoyed every insufficiently small piece of it and I’ve you bookmarked to have a look on pristine stuff you post.

  42. kasyno says:

    With regard to web-sites like this was made the world wide web. I browsing typically the day-to-day dozens of very similar internet sites within this subject matter, nevertheless here’s precisely what I am just trying to find, without the effects in addition to gossips. Pretty good!

  43. Thanks for this fantastic short article. A person a good deal extra factor to note is the fact the majority of digital cameras get there pre-loaded with some form of zoom lens that permits about of through which scene to acquire included via zooming’ within and absent. All these changes in concentrating length will most likely be reflected from the viewfinder as properly as on large monitor suitable with the back again with the genuine camera.

  44. It’s challenging to attain familiar community by this topic, on the contrary you sound approximating you identify what you’re talking about! Thanks

  45. Helpful info. Fortunate me I found your web site accidentally, and I am stunned why this coincidence did not happened earlier! I bookmarked it.

  46. I would like to express some thanks to this writer for bailing me out of this instance. After researching through the online world and coming across tips which are not pleasant, I thought my life was gone. Being alive minus the solutions to the difficulties you have sorted out by means of this guide is a serious case, as well as the ones which might have adversely damaged my career if I had not encountered your web site. Your own know-how and kindness in playing with everything was priceless. I don’t know what I would have done if I hadn’t come upon such a thing like this. I am able to at this point look ahead to my future. Thanks very much for this expert and amazing help. I won’t be reluctant to recommend your web site to anybody who will need guide on this subject matter.

  47. Yang Erps says:

    Attractive section of content. I just stumbled upon your website and in accession capital to assert that I get in fact enjoyed account your blog posts. Any way I’ll be subscribing to your feeds and even I achievement you access consistently fast.

  48. Heya! I just wanted to ask if you ever have any trouble with hackers? My last blog (wordpress) was hacked and I ended up losing months of hard work due to no backup. Do you have any solutions to stop hackers?

  49. Im obliged for the blog post. Great.

  50. Appreciate you sharing, great blog article. Want more.

  51. Muchos Gracias for your blog article.Much thanks again. Fantastic.

  52. “Great, thanks for sharing this post.Thanks Again. Really Cool.”

  53. I am so grateful for your post. Really Cool.

  54. A big thank you for your blog post.Much thanks again. Great.

  55. Appreciate you sharing, great blog article. Awesome.

  56. claim says:

    I’m not dependable where you are getting your info, on the contrary abundant matter. I desires to spend a quantity of calculate learning much further or else understanding further. Gratitude for fantastic communication I was looking used for this information for my mission.

  57. Fantastic blog.Really looking forward to read more. Really Great.

  58. Major thankies for the blog article.Really thank you! Awesome.

  59. more info says:

    I value the blog.Thanks Again. Want more.

  60. I think this is a real great post.Really thank you! Want more.

  61. Awesome blog post.Really looking forward to read more. Great.

  62. Really informative blog post.

  63. orthodontics says:

    Thanks for the blog.Really thank you! Will read on…

  64. wow, awesome post. Keep writing.

  65. It is ok to investigation the Internet for post ideas, but it is not ok to copy word-for-word of any article. Paraphrasing may also be classified as plagiarism. Be original.

  66. cheap rims says:

    This is one awesome article post.Thanks Again. Much obliged.

  67. Thanks again for the post.Much thanks again. Awesome.

  68. buy traffic says:

    Appreciate you sharing, great article.Thanks Again. Will read on…

  69. I appreciate you sharing this article post.Thanks Again. Great.

  70. Really informative post.Much thanks again.

  71. alteril says:

    I really like and appreciate your article post.Thanks Again.

  72. Appreciate you sharing, great blog article.Thanks Again. Really Great.

  73. A big thank you for your blog post.Really thank you! Keep writing.

  74. sex cams says:

    I am so grateful for your post.Really thank you! Much obliged.

  75. lift says:

    Thanks a lot for the post.Really thank you! Great.

  76. dieta dukana says:

    This is one awesome blog post. Really Cool.

  77. Wow, great article. Really Great.

  78. Im grateful for the article.Really thank you!

  79. A round of applause for your post.Thanks Again. Much obliged.

  80. power supply says:

    Fantastic article post. Much obliged.

  81. A big thank you for your blog article.Really looking forward to read more. Really Cool.

  82. Thanks-a-mundo for the post.Really looking forward to read more. Much obliged.

  83. Really appreciate you sharing this blog post.Really thank you! Cool.

  84. Thank you for your blog. Awesome.

  85. wow, awesome article.Really thank you! Fantastic.

  86. thanks says:

    I really like and appreciate your blog article. Fantastic.

  87. start a blog says:

    I value the article post.Really thank you! Much obliged.

  88. fat burner says:

    A big thank you for your article post.Really thank you! Fantastic.

  89. I am so grateful for your blog.Thanks Again. Keep writing.

  90. I adore your wordpress template, where did you download it from?

  91. I truly appreciate this article.Really thank you! Cool.

  92. Throughout the grand design of things you get an A+ for effort. Exactly where you misplaced me personally ended up being on the particulars. As as the maxim goes, details make or break the argument.. And it couldn’t be much more accurate at this point. Having said that, permit me say to you just what did deliver the results. The text is certainly incredibly convincing and this is most likely the reason why I am taking the effort to comment. I do not really make it a regular habit of doing that. Second, although I can easily notice the leaps in logic you make, I am not necessarily convinced of just how you seem to unite your details which in turn produce the conclusion. For now I will subscribe to your point but wish in the near future you connect the dots much better.