Bloomberg taps consumer sentiment for equity analytics

Bloomberg taps consumer sentiment for equity analytics

Bloomberg is to begin offering traders social media analytics as a real-time sentiment indicator for stocks heavily influenced by consumer opinion.

The news and information group has struck a deal with WiseWindow, a syndicated data provider, to provide its real-time consumer sentiment measurement technology, Mobi, across Bloomberg's network of 300,000 desktop terminals.

WiseWindow claims the technology offers a three-week leading indicator of stock performance in key industry vehicles. It will initially provide Bloomberg with a consumer sentiment index around the airline industry as a whole, as well as vertical indices for customer service, pricing and scheduling within the industry itself.

While firms like Derwent Capital and WallStreetBirds are mining Twitter chatter for sentiment analysis, the Mobi probe trawls the Web for consumer opinion across a range of public fora, including Twitter, Facebook and online message boards.

Sid Mohasseb, chief executive officer of WiseWindow says: "No single source of online opinions, be it Twitter, Facebook, blogs, etc. is as predictive on its own. Only the aggregate opinions from ALL sources are truly predictive of an industry's stock prices."

He says opinions expressed on a specific industry's topic are even more predictive than overall comments. "Test cases using the automotive industry found opinions about car problems, car quality/reliability/durability and rebates are especially well-correlated with Ford and GM stock prices," says Mohasseb. "Analysis from a top Wall Street investment bank and an independent source confirmed our correlations with weekly automotive sales data."

Independent analytics shop Emerald Logic conducted a study to test the impact of WiseWindow's data on equity trading returns. Says Patrick Lilley, the firm's chief executive officer: "We tested for the first six months of 2011 on GM, Ford, American Airlines and Southwest Airlines, all of which declined during this period. A simple momentum trading program beat the market, but adding WiseWindow's data boosted returns by over 30% on an annualised basis for GM, Ford, and Southwest Airlines. For American Airlines, the uplift was 65% annualised. Volatility of returns was also significantly reduced."

In the coming weeks, the Mobi data available to Bloomberg subscribers will expand to additional vertical industries, including healthcare, consumer electronics, and automotive, among others.

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