When The White House Exploded: Twitter and the Markets

Twitter, Stock Market, Predictive, Social Media, White House Exploded, Traders, Paul Hawtin

The significance of Twitter in the world of trading

Over a year ago, the Associate Press tweeted:
‘Breaking: Two Explosions in the White House and Barack Obama is injured.’

The tweet was taken down almost instantly. It later transpired that AS’s account had been hacked by a group known as the Syrian Electronic Army, previously responsible for hacks on the BBC and CBS News sites. However, the tweet was still up for long enough to impact upon the stock market; the Dow Jones Industrial Average dropped sharply in reaction to the news.

This demonstrated just how integral Twitter and other social media sites have become to the world of financial trading. Savvy traders have started using this knowledge to their advantages, acquiring information from social media sites and acting quicker than their competitors.

For example, just after 8am on 11 November 2013, a Canadian newspaper leaked the news that Blackberry’s buyout had collapsed. It took the majority of Wall Street 180 seconds to acknowledge this. Investment clients of the data analytics firm Dataminr, on the other hand, had a massive advantage – they learned about the news in seconds and shorted the stock ahead of the rest of the investment community.

If you work in trading and you’re not familiar with Dataminr, then you probably should be. They specialise in transforming the Twitter stream into actionable alerts, identifying relevant information rapidly and passing it on to their clients in the Finance, News and Public sectors.

Twitter has even been used to predict some occurrences on the stock market before they occurred. In August 2013, Social Market Analytics (SMA) pooled the ‘sentiment analytics‘ of roughly 400,000 Twitter accounts. They noted that the amount of positive chatter about Apple was unusually high and advised their clients of this. Soon after, Carl Icahn issued a Twitter statement declaring that he had just purchased a huge chunk of Apple stock, resulting in big profits for investors who had acted upon SMA’s advice.

Financial traders are beginning to recognise that they cannot afford to ignore the predictive power of Twitter. More and more experts are starting to react, by investing heavily in the appropriate technology.

‘Our systems can analyze and determine a Tweet in less than a second from the moment a person tweets'” says Paul Hawtin, the founder of the investment management firm Cayman Atlantic. ‘Analyzing untapped and unstructured data sets such as Twitter gives us a distinct advantage over other investment managers.’

Hawtin’s particular area of interest is sentiment analysis, analysing tweets for relevance and for positive and negative sentiment to base its trade on.

Give us your opinion – do you believe that Twitter and sentiment analysis is the future of financial trading?

 

 

Comments 3

  • Social networks content monitoring and analysis (text analytics) is highly useful for trading equities because millions of consumers are telling you what they think about products and services every day. How could you possibly ignore that? Hedge funds and asset managers are just beginning to understand its significance.

    • That is very true Davide, access to extensive data like that will always be incredibly useful.

      I’m not personally sure whether sentiment analysis can be used in isolation to draw any firm conclusions. However, in the future it’s definitely going to prove to be a valuable indicator.

      I don’t suppose you’d be interested in contributing personally to the blog? If so, send me an email!

  • […] Relatively recently, I wrote an article on the revolutionary impact that Twitter could have on stock market trading. […]

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