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Can Twitter Predict Stock Market Moves?

by Len Costa
Publication: Institutional Investor

May 24, 2011


The following is an excerpt from an article in the Institutional Investor which discusses a recent paper written by finance professors Tim Loughran and Bill McDonald.  To read the entire article visit: Can Twitter Predict Stock Market Moves?

What happens when a 28-year-old British currency trader who previously sold a hair care business teams up with an international trio of informatics professors who publish an academic paper that purportedly unlocks the potential for Twitter to predict stock market moves?

They launch Europe's first social media-based hedge fund, of course!

That, in a nutshell, is the improbable story behind London-based Derwent Capital Markets, whose Cayman Island-domiciled Derwent Absolute Return Fund began trading last week. The fund appears to be the first to make bets based solely on sentiment analysis derived from the microblogging platform, which celebrated its fifth anniversary in March and, by one recent count, now produces more than 140 million messages, or Tweets, on average, every day.