Featured Research

from universities, journals, and other organizations

Using Twitter to predict financial markets

Date:
March 26, 2012
Source:
University of California - Riverside
Summary:
Researchers have developed a model that uses data from Twitter to help predict the traded volume and value of a stock the following day.

A University of California, Riverside professor and several other researchers have developed a model that uses data from Twitter to help predict the traded volume and value of a stock the following day.

A trading strategy based on the model created by Vagelis Hristidis, an associate professor at the Bourns College of Engineering, one of his graduate students and three researchers at Yahoo! in Spain, outperformed other baseline strategies by between 1.4 percent and nearly 11 percent and also did better than the Dow Jones Industrial Average during a four-month simulation.

"These findings have the potential to have a big impact on market investors," said Hristidis, who specializes in data mining research, which focuses on discovering patterns in large data sets. "With so much data available from social media, many investors are looking to sort it out and profit from it."

Hristidis and his co-authors, Eduardo J. Ruiz, one of his graduate students, and Carlos Castillo, Aristides Gionis and Alejandro Jaimes, all of whom work for Yahoo! Research Barcelona, presented the findings last month at the Fifth ACM International Conference on Web Search & Data Mining in Seattle.

Hristidis and his co-authors set out to study 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. Further, past work has mostly studied the overall stock market indexes, and not individual stocks.

They obtained the daily closing price and the number of trades from Yahoo! Finance 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 needed to exclude tweets that focused on the fruit.

They expected to find the number of trades was correlated with the number of tweets. Surprisingly, the number of trades is slightly more correlated with the number of what they call "connected components." That is the number of posts about distinct topics related to one company. For example, using Apple again, 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.

In two variants of an autoregression model, that is buying every day stocks based on the assumption that the stock price is a function of the prices of the stock in the last few days, losses were 8.9 percent and 13.1 percent.

In the random model, in which as random set of stocks is bought every, sold at the end of the day and repeated the next day, the average loss was 5.5 percent.

In the fixed model, which involves buying a set of stocks that have best combination of market cap, company size and total debt and keeping them for the entire simulation, the average loss was 3.8 percent.

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

Hristidis notes several potential weaknesses in the study.

First, 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.


Story Source:

The above story is based on materials provided by University of California - Riverside. Note: Materials may be edited for content and length.


Cite This Page:

University of California - Riverside. "Using Twitter to predict financial markets." ScienceDaily. ScienceDaily, 26 March 2012. <www.sciencedaily.com/releases/2012/03/120326113321.htm>.
University of California - Riverside. (2012, March 26). Using Twitter to predict financial markets. ScienceDaily. Retrieved October 2, 2014 from www.sciencedaily.com/releases/2012/03/120326113321.htm
University of California - Riverside. "Using Twitter to predict financial markets." ScienceDaily. www.sciencedaily.com/releases/2012/03/120326113321.htm (accessed October 2, 2014).

Share This



More Computers & Math News

Thursday, October 2, 2014

Featured Research

from universities, journals, and other organizations


Featured Videos

from AP, Reuters, AFP, and other news services

Mozilla Bets On Software To Sell Its Chromecast Competitor

Mozilla Bets On Software To Sell Its Chromecast Competitor

Newsy (Oct. 1, 2014) Mozilla's Matchstick streaming device is entering a crowded market. The company is banking on open-source software to rise above the competition. Video provided by Newsy
Powered by NewsLook.com
App Teaches Kindergarteners to Code

App Teaches Kindergarteners to Code

AP (Oct. 1, 2014) They can't all read yet, but soon kindergarteners may be able to create basic computer code. Researchers in Massachusetts developed an app that teaches young kids a simple computer programming language. (Oct. 1) Video provided by AP
Powered by NewsLook.com
Microsoft Goes For Familiarity Over Novelty In Windows 10

Microsoft Goes For Familiarity Over Novelty In Windows 10

Newsy (Sep. 30, 2014) At a special event in San Francisco, Microsoft introduced its latest operating system, Windows 10, which combines key features from earlier versions. Video provided by Newsy
Powered by NewsLook.com
French Apple Fans Discover the Apple Watch

French Apple Fans Discover the Apple Watch

AFP (Sep. 30, 2014) Apple fans in France discover the latest toy, the Apple Watch. The watch comes in two sizes and an array of interchangeable, fashionable wrist straps. Duration: 00:42 Video provided by AFP
Powered by NewsLook.com

Search ScienceDaily

Number of stories in archives: 140,361

Find with keyword(s):
Enter a keyword or phrase to search ScienceDaily for related topics and research stories.

Save/Print:
Share:

Breaking News:

Strange & Offbeat Stories


Space & Time

Matter & Energy

Computers & Math

In Other News

... from NewsDaily.com

Science News

Health News

Environment News

Technology News



Save/Print:
Share:

Free Subscriptions


Get the latest science news with ScienceDaily's free email newsletters, updated daily and weekly. Or view hourly updated newsfeeds in your RSS reader:

Get Social & Mobile


Keep up to date with the latest news from ScienceDaily via social networks and mobile apps:

Have Feedback?


Tell us what you think of ScienceDaily -- we welcome both positive and negative comments. Have any problems using the site? Questions?
Mobile: iPhone Android Web
Follow: Facebook Twitter Google+
Subscribe: RSS Feeds Email Newsletters
Latest Headlines Health & Medicine Mind & Brain Space & Time Matter & Energy Computers & Math Plants & Animals Earth & Climate Fossils & Ruins