It has been on our radar since December, and now the world’s first hedge fund that invests based on Twitter sentiment is open for business.
Derwent Capital Markets has finally opened the long-anticipated Twitter fund, or, as they’re calling it, “Europe’s first social media-based Hedge Fund”.
The fund will use the “fear and greed” aspect of financial markets, as determined by what people tweet, in order to make its moves. It will access 10% of Twitter’s firehose to assess whether people’s sentiments are generally positive or negative in order to predict the movement of the stock market.
Although the fund was supposed to launch months ago, they stalled due to a higher than expected demand for participation in the fund.
Paul Hawtin, the Founder and Fund Manager, has this to say about the firm’s decision to use Twitter as a measurement of the markets:
“For years investors have widely accepted that financial markets are driven by fear and greed but we’ve never before had the technology or data to be able to quantify human emotion. This is the 4th dimension.”
The hedge fund is based on research by computer science students at Cornell, who authored a paper that showed more than 85% accuracy in predicting the movement of the Dow based on Twitter sentiment.