Twitter Hedge Fund Beat Market In Its First Month

Derwent Capital, the hedge fund that is using Twitter sentiment to make its investments, beat the market – and other hedge funds – in its first full month of trading. Could this be the beginning of a social media investment trend?

The hedge fund was announced back in December 2010 as a way of harnessing social sentiment to predict the stock market. It invests based on a randomly selected portion of all tweets on Twitter, analyzing them for sentiment.

The basis for Twitter sentiment as a predictor of the stock market is an academic paper published last year which found that certain emotive words in tweets – even those not directly related to the financial industry – signaled a rise or a fall in the stock market.

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