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Justin Grant
Justin Grant
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U.K. Hedge Fund to Use Twitter to Predict Market Moves

Can Twitter be used to predict daily moves in the global equity markets?

Can Twitter be used to predict daily moves in the global equity markets?

U.K.-based hedge fund Derwent Capital, which is due to launch this spring, is betting that it will. According to Dow Jones publication eFinancialNews, the firm is wagering around $40 million on a strategy that will use information culled from Twitter to predict movements in stock prices.

Citing a CNBC segment, the website reported that Derwent will monitor millions of Twitter messages every day to predict which way the markets will move.

From eFinancialNews:

Derwent Capital will scan a selected 10% of available tweets at random and will then categorise those messages into one of a range of mood states, which could include 'alert', 'vital' or 'happy' from which the firm's technology will make predictions about potential stock movements.

Hawtin came up with the idea for the fund following the publication of a paper by the University of Manchester and Indiana University in October which demonstrated that the number of emotional words on Twitter could be used to predict daily moves in the Dow Jones Industrial Average.

However not everyone is buying the idea this strategy will work. John Bates, the chief technology officer at Progress Software is among the skeptics.

From eFinancialNews:

Predicting stock market moves via Twitter is highly unlikely. If an event such as a war or financial crisis occurs in real-time, information in 140 characters is not going to help organisations make real-time business decisions.

As the Senior Editor of Advanced Trading, Justin Grant plays a key role in steering the magazine's coverage of the latest issues affecting the buy-side trading community. Since joining Advanced Trading in 2010, Grant's news analysis has touched on everything from the latest ... View Full Bio
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