The results of a new study suggest that the type and frequency of messages posted on Twitter may indicate how investors are feeling about particular stocks, and where the market may go.
Researchers from the European Central Bank analyzed bullish tweets. Bullish posts had optimistic messages about a stock price rising.
They then compared the tweets to the actual results on the stock markets, looking for a link between bullish posts and market activity.
The study found that the daily occurrence of bullishness on Twitter can be a “useful” indication of investor sentiment.
So, if users see a whole bunch of tweets saying company $XYZ’s share price is going to go up, it likely will.
“Twitter bullishness has a statistically and economically significant predictive value in respect of share prices in the United States, the United Kingdom and Canada,” wrote authors Huina Mao, Scott Counts and Johan Bollen in the paper.
The study also found that high bullishness on Twitter suggests an “increase in daily returns on the following day, with there being a return to normal levels within the next two to five days.”
Google and the markets
Researchers looked for correlations between Google searches and investor sentiment to see if it reflected the same pattern identified with Twitter. Not surprising, they noticed a link.
Moore searches on Google for bullish stocks were indeed linked to bullish behaviour on the markets.
But what they also found is that bullish tweets will provide a faster indication of investor sentiment than Google queries.
Edit your tweets, thank Kim Kardashian?
The head of Twitter, meanwhile, appears to be taking advice from Kim Kardashian.
Kanye West’s wife posted a tweet asking Twitter to add a feature that would let users edit tweets. The new feature would help users like Kim fix a typo without having to delete and re-send the tweet.
I just emailed Twitter to see if they can add an edit feature so that when u misspell something u don't have to delete & repost Let's see...
— Kim Kardashian West (@KimKardashian) July 25, 2015
Jack Dorsey, back for (an interim) round two at the company he co-founded, wasted no time responding to Kim.
@KimKardashian great idea! We're always looking at ways to make things faster and easier.
— Jack (@jack) July 25, 2015
The ability to edit a post isn’t a completely bad idea, but we’re used to waiting a while for it on almost any platform. Facebook took years to do essentially the same thing. Users couldn’t edit a Facebook post until September 2013.
