TruTricks Notes By Brian Swichkow: This is an interesting article that presents a good point. Twitter is a micro-blogging service that has gained popularity in the past three years and currently in use by millions of people. Wired states that the mood of Twitter can accurately predict the Dow Jones three days later with an accuracy of 86.7 percent.
When you think about it, it makes sense that this is possible. Twitter is just a group of people talking in an online forum. The emotions, either negative or positive, can carry contagiously through any group of people – online or not. According to the VIX index or any social psychologist, when people feel upset or scared they have a tendency to distance themselves from risk. It’s not a far jump to say that that attitudes of people on Twitter can indirectly effect the stock market as a whole.
Source: “Twitter Can Predict Stock Market”
The emotional roller coaster captured on Twitter can predict the ups and downs of the stock market, a new study finds. Measuring how calm the Twitterverse is on a given day can foretell the direction of changes to the Dow Jones Industrial Average three days later with an accuracy of 86.7 percent.
“We were pretty astonished that this actually worked,” said computational social scientist Johan Bollen of Indiana University-Bloomington. The new results appear in a paper on the arXiv.org preprint server.
Bollen and grad student Huina Mao stumbled on this computational crystal ball almost by accident. Earlier studies had found that blogs can be used to gauge public mood, and that tweets about movies can predict box office sales. An open source mood-tracking tool called OpenFinder sorts tweets into positive and negative bins based on emotionally charged words.
But Bollen wanted to build a more nuanced emotional barometer. He used a standard psychology tool called the Profile of Mood States, a quick questionnaire that is used frequently in pharmaceutical research or sports medicine.
The original questionnaire asks people to rate how closely their feelings match 72 different adjectives, including “friendly,” “peeved,” “active,” “on edge” and “panicky,” and uses the responses to measure mood along six dimensions: calmness, alertness, sureness, vitality, kindness and happiness.
View the full article on Wired Top Stories
“Twitter Can Predict Stock Market”
Tags: Dow Jones, Finances, Stock Market, Twitter, Wired
