Forum for Science, Industry and Business

Sponsored by:     3M 
Search our Site:

 

Using Twitter to predict financial markets

26.03.2012
UC Riverside professor and collaborators build model using Twitter data that outperforms other investment strategies

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.

The published paper that outlines the findings can be found at http://www.cs.ucr.edu/~vagelis/publications/wsdm2012-microblog-financial.pdf.

The research by Hristidis and Ruiz was supported by the National Science Foundation.

Sean Nealon | EurekAlert!
Further information:
http://www.ucr.edu

Further reports about: Apple iPhone Riverside Tweets Twitter Twitter data stock price

More articles from Business and Finance:

nachricht Frugal Innovations: when less is more
19.04.2017 | Fraunhofer-Institut für Arbeitswirtschaft und Organisation IAO

nachricht Europe's microtechnology industry is attuned to growth
10.03.2017 | IVAM Fachverband für Mikrotechnik

All articles from Business and Finance >>>

The most recent press releases about innovation >>>

Die letzten 5 Focus-News des innovations-reports im Überblick:

Im Focus: Can the immune system be boosted against Staphylococcus aureus by delivery of messenger RNA?

Staphylococcus aureus is a feared pathogen (MRSA, multi-resistant S. aureus) due to frequent resistances against many antibiotics, especially in hospital infections. Researchers at the Paul-Ehrlich-Institut have identified immunological processes that prevent a successful immune response directed against the pathogenic agent. The delivery of bacterial proteins with RNA adjuvant or messenger RNA (mRNA) into immune cells allows the re-direction of the immune response towards an active defense against S. aureus. This could be of significant importance for the development of an effective vaccine. PLOS Pathogens has published these research results online on 25 May 2017.

Staphylococcus aureus (S. aureus) is a bacterium that colonizes by far more than half of the skin and the mucosa of adults, usually without causing infections....

Im Focus: A quantum walk of photons

Physicists from the University of Würzburg are capable of generating identical looking single light particles at the push of a button. Two new studies now demonstrate the potential this method holds.

The quantum computer has fuelled the imagination of scientists for decades: It is based on fundamentally different phenomena than a conventional computer....

Im Focus: Turmoil in sluggish electrons’ existence

An international team of physicists has monitored the scattering behaviour of electrons in a non-conducting material in real-time. Their insights could be beneficial for radiotherapy.

We can refer to electrons in non-conducting materials as ‘sluggish’. Typically, they remain fixed in a location, deep inside an atomic composite. It is hence...

Im Focus: Wafer-thin Magnetic Materials Developed for Future Quantum Technologies

Two-dimensional magnetic structures are regarded as a promising material for new types of data storage, since the magnetic properties of individual molecular building blocks can be investigated and modified. For the first time, researchers have now produced a wafer-thin ferrimagnet, in which molecules with different magnetic centers arrange themselves on a gold surface to form a checkerboard pattern. Scientists at the Swiss Nanoscience Institute at the University of Basel and the Paul Scherrer Institute published their findings in the journal Nature Communications.

Ferrimagnets are composed of two centers which are magnetized at different strengths and point in opposing directions. Two-dimensional, quasi-flat ferrimagnets...

Im Focus: World's thinnest hologram paves path to new 3-D world

Nano-hologram paves way for integration of 3-D holography into everyday electronics

An Australian-Chinese research team has created the world's thinnest hologram, paving the way towards the integration of 3D holography into everyday...

All Focus news of the innovation-report >>>

Anzeige

Anzeige

Event News

Marine Conservation: IASS Contributes to UN Ocean Conference in New York on 5-9 June

24.05.2017 | Event News

AWK Aachen Machine Tool Colloquium 2017: Internet of Production for Agile Enterprises

23.05.2017 | Event News

Dortmund MST Conference presents Individualized Healthcare Solutions with micro and nanotechnology

22.05.2017 | Event News

 
Latest News

How herpesviruses win the footrace against the immune system

26.05.2017 | Life Sciences

Water forms 'spine of hydration' around DNA, group finds

26.05.2017 | Life Sciences

First Juno science results supported by University of Leicester's Jupiter 'forecast'

26.05.2017 | Physics and Astronomy

VideoLinks
B2B-VideoLinks
More VideoLinks >>>