How Twitter Chatter Predicts Stock Prices
Though University of California, Riverside, researchers were not looking for a correlation between Twitter talk and stock performance, they found it. Now what will they do?
What's the Latest Development?
A team of computer scientists has found that Twitter chatter can be used to predict stock prices, even though their study was not looking to do that. Researchers at the University of California, Riverside, first defined a variable they called connected components, meaning "the number of distinct conversational threads taking place around a company in any given day." Three possible threads around Apple, for example, could be the iPad, iPhone and the Foxconn factory. The more connected components, "the higher the volume of trading for that stock in subsequent days."
What's the Big Idea?
The model also suggested that the presence of more connected components signaled a rise in stock prices, prompting researchers to developed a trading formula that took advantage of this pattern. Their formula did quite well, outperforming the Dow Jones Industrial Average over four months (a 2.2% loss for the Twitter model versus a 4.2% loss for the Dow). So why the connection? Lead researcher Vagelis Hristidis theorizes that when bad news strikes, everyone focuses on that one topic, reducing the number of connected connections. Good news, perhaps being less interesting, allows for more digressions in the conservation.
Photo credit: shutterstock.com
Swipe right to make the connections that could change your career.
Swipe right. Match. Meet over coffee or set up a call.
No, we aren't talking about Tinder. Introducing Shapr, a free app that helps people with synergistic professional goals and skill sets easily meet and collaborate.
Is it "perverseness," the "death drive," or something else?
A disturbing interview given by a KGB defector in 1984 describes America of today and outlines four stages of mass brainwashing used by the KGB.
- Bezmenov described this process as "a great brainwashing" which has four basic stages.
- The first stage is called "demoralization" which takes from 15 to 20 years to achieve.
- According to the former KGB agent, that is the minimum number of years it takes to re-educate one generation of students that is normally exposed to the ideology of its country.
It's up to us humans to re-humanize our world. An economy that prioritizes growth and profits over humanity has led to digital platforms that "strip the topsoil" of human behavior, whole industries, and the planet, giving less and less back. And only we can save us.
- It's an all-hands-on-deck moment in the arc of civilization.
- Everyone has a choice: Do you want to try to earn enough money to insulate yourself from the world you're creating— or do you want to make the world a place you don't have to insulate yourself from?
SMARTER FASTER trademarks owned by The Big Think, Inc. All rights reserved.