Modulus Informatics has launched a free online service providing stock trading analysis based on Twitter sentiment data.
Research published in October found that analysing the content of daily Twitter feeds using two mood tracking tools enabled the team to predict with an 87.6% accuracy the daily ups and downs in the closing value of the Dow Jones Industrial Average.
This prompted London-based Derwent Capital Markets to launch a £25 million social media-based hedge fund, using Twitter to gauge market sentiment.
Another academic study from Technical University of Munich economists also found that the sentiment of tweets is associated with abnormal stock returns. The academics are now using Twitter for a Web site that predicts stock price trends.
Modulus Informatics has now joined the fray with its free site WallStreetBirds.com, that lets users pick stocks to analyse before its system pulls in Twitter data and comes up with buy or sell signals.
The firm is also providing a programming API that it says can be used for developing high frequency trading systems based on the instantaneous analysis of social media data.
Finextra Verdict: We hear much about Twitter's fabled prescience in forecasting news and trends, but on some days the world beyond the shallow tweet chatter seems very far away. Stock picking engines rely on their ability to sift throught the general noise and zero in on the hard signals that matter. But what if Twitter has become the preserve of the chattering classes, clogged with an endless stream of self-congratulatory tweets from total strangers pretending to be best mates? Evidence for the prosecution: As the debt crisis rumbles on and people run riot in London, what were the top trending topics on Twitter this morning?
We rest our case, and don the tin hats in readiness for the barrage (we will be tweeting this).