Week 6 (#1): "How Tweet It Is..."

When I first read this article, I had to read it a second time to make sure I was understanding it correctly...hedge funds are now using TWITTER and SOCIAL-MEDIA sites to make investment decisions?? I don't know about you, but I wouldn't want my investments to be determined by people's Facebook statuses and Tweets...or maybe I would?


More than a dozen hedge funds and high-frequency traders are now making trades guided, in part, by data from social-media sources like Facebook, YouTube and Twitter. There are even social-media analytic firms that supply the investors with analyses of social-media activities based on sentiment (an emotion or attitude about something; quite often about a stock or company). These activities are then crunched by computer algorithms to find market-related opinions and tally what those opinions are; thus predicting the direction of the market. This use of market sentiment isn't totally new; investors have surveyed and tallied positive and negative news stories in the past to gauge their decisions.


Researchers believe that although this tactic is used mostly as a supplement to trading strategies, social-media trends could provide valuable insight into short-term market direction. Would you trust your money to be traded off Twitter information??


Source:
http://online.wsj.com/article/SB10001424052970204778604577239574141848142.html