20 October 2017
Register now

Twitter chatter influences stock prices - survey

13 February 2013  |  11971 views  |  1 Facebook

Share price volatility is affected by the chatter of public opinion on social media sites such as Twitter and Facebook, according to UK financial professionals.

A poll of 360 people from Colt Technology Services found that 63% of respondents, including brokers and heads of trading desks, believe the valuation of individual stocks can be directly linked to public sentiment contained in social media channels.

Although only seven per cent regard sentiment on Twitter, Facebook and other sites as a leading indicator, just under half do consider it as a trailing indicator.

Some hedge funds and proprietary trading houses are trying to harness this social media chatter, feeding it into algorithmic strategies in a bid to steal a march on competitors who use more traditional forms of data.

The survey reveals some concerns over the use of sentiment-based trading, with nearly a third of respondents believing that the ability to respond fast enough to social media is a barrier to adoption.

The sheer volume of data from social media is seen as one of the major challenges to creating successful trading strategies, with 43% claiming that they would struggle to respond fast enough to the daily influx of information.

Regulatory pressures are seen as less of an issue, cited by just 13% as a barrier to adoption.

Hugh Cumberland, solution manager, payment and settlement services, Colt, says: "In a market where liquidity is highly valued and investors cautious, new sources of competitive advantage will always be welcome. What's important is working out how best to leverage the data mined from millions of social media messages to help trading firms cut through inertia and deliver much needed volume."

Earlier this month, one of the trailblazers of the social media sentiment trading world put itself up for auction after a brief, varied and mixed existence.

Derwent Capital launched a £25 million Twitter sentiment-based hedge fund in 2011 but the experiment was quickly shuttered despite a steady performance. In January it changed tack, offering the technology to day traders through a DCM Dealer platform.

Most recently it put itself up for auction on its Web site. A prospectus lists the guide price for the firm at £5 million, with a starting bid of £1. However, with less than five days to go until the auction closes, the highest bid is just £100,000.

Comments: (1)

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune | 15 February, 2013, 18:27

There are at least two challenges of mining messages from the entire universe of social media networks: (1) Mind-boggling volume (2) Lack of structure that makes accurate sentiment analysis all but impossible. That explains why there's renewed interest in tools that focus exclusively on Twitter messages and deliver adequate throughput at high accuracy levels.

Be the first to give this comment the thumbs up 0 thumb ups! (Log in to thumb up)
Comment on this story (membership required)

Finextra news in your inbox

For Finextra's free daily newsletter, breaking news flashes and weekly jobs board: sign up now

Related stories

DCM Capital auctions itself on line - starting bid £1

DCM Capital auctions itself on line - starting bid £1

04 February 2013  |  6012 views  |  0 comments | 4 tweets
Twitter sentiment-based trading platform set for launch

Twitter sentiment-based trading platform set for launch

11 January 2013  |  8030 views  |  0 comments | 12 tweets | 1 linkedin
I Robot: Thomson Reuters adds psych analysis to machine-readable news

I Robot: Thomson Reuters adds psych analysis to machine-readable news

25 June 2012  |  10100 views  |  0 comments
Thomson Reuters launches social media sentiment analysis service

Thomson Reuters launches social media sentiment analysis service

07 March 2012  |  9752 views  |  0 comments
Topsy Labs to release Twitter trading tool

Topsy Labs to release Twitter trading tool

25 January 2012  |  6800 views  |  0 comments
Bloomberg taps consumer sentiment for equity analytics

Bloomberg taps consumer sentiment for equity analytics

31 August 2011  |  16604 views  |  0 comments
WallStreetBirds taps Twitter data for stock tips

WallStreetBirds taps Twitter data for stock tips

08 August 2011  |  8815 views  |  2 comments
Twitter-based hedge fund launches

Twitter-based hedge fund launches

18 May 2011  |  11963 views  |  1 comments

Related company news

 

Related blogs

Create a blog about this story (membership required)
visit www.vasco.comvisit www.fivedegrees.nl

Top topics

Most viewed Most shared
satelliteGates Foundation backs Ripple collaboratio...
8479 views comments | 13 tweets | 10 linkedin
HSBC partners Bud for open banking trialHSBC partners Bud for open banking trial
8389 views comments | 21 tweets | 26 linkedin
IBM uses blockchain to improve cross-border payments processingIBM uses blockchain to improve cross-borde...
7503 views comments | 9 tweets | 17 linkedin
Sibos 2017: API or the highwaySibos 2017: API or the highway
6899 views comments | 10 tweets | 22 linkedin
Eight banks form joint venture to launch blockchain trade platformEight banks form joint venture to launch b...
6567 views comments | 14 tweets | 23 linkedin

Featured job

Competitive base, double ote, benefits
London, UK

Find your next job