Researchers develop model to 'predict stock market using Twitter'

   Mar 27, 4:40 pm

California, Mar 27 (ANI): Researchers have reportedly developed a new model that uses data from micro blogging site Twitter to help predict the traded volume and value of a stock the following day.

Vagelis Hristidis, an associate professor at the University of California, with one of his graduate students and three researchers at Yahoo, studied how activity in Twitter is correlated to stock prices and traded volume.

They obtained the daily closing price and the number of trades from Yahoo Finance for 150 randomly selected companies in the S and P 500 Index for the first half of 2010.

Then, they developed filters to select only relevant tweets for those companies during that time period. For example, if they were looking at Apple, they needed to exclude tweets that focused on the fruit.

They expected to find the number of trades was correlated with the number of tweets.

But, surprisingly, the number of trades is slightly more correlated with the number of what they call "connected components."

They also found stock price is slightly correlated with the number of connected components.

In two variants of an autoregression model, that is buying every day stocks based on the assumption that the stock price is a function of the prices of the stock in the last few days, losses were 8.9 percent and 13.1 percent.

The model the researchers developed using Twitter data lost on average 2.4 percent.

Hristidis, who specializes in data mining research, said the findings 'have the potential to have a big impact on market investors'. (ANI)

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