Economists Use Twitter To Beat The Stock Market

“Ever wonder why fund managers can’t beat the S&P 500?” mused Gordon Gecko in 1987’s Wall Street. “‘Cause they’re sheep, and sheep get slaughtered.”

Sound advice at the time, perhaps, but new research suggests that tapping into that same herd mentality on Twitter might pay off handsomely for savvy investors.

A team of economists at the Technische Universitaet Muenchen (TUM, the Technical University of Munich) have developed a website that can be used to predict individual stock trends and patterns using information generated by Twitter.

How? By polling real-time sentiment.

The team analysed over 250,000 tweets sent over a 6-month period, discovered a “striking co-ordination” between what Twitter was saying about stock against that of other investors and analysts, and determined that investors following stock market tweets could achieve an average return rate of some 15%.

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