The Atlantic Wire – You might think a 140 character tweet doesn’t have much power, but, as one hedge fund proved, Twitter can help you win the stock market. “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,” All Twitter’s Lauren Dugan reports. Using an algorithm based on the social media mood that day, the hedge fund predicted the market to make the right trades. Sounds unbelievable that something cluttered with mundane musings and media links could have anything smart to say about the market. But it’s working so far.
The idea behind it. Social media is a powerful force in the market–we think it could be making things worse. This algorithm puts those ideas to the test. It’s based on a paper that came out of University of Manchester and Indiana University, which found a correlation between mood and Twitter, explains Bloomberg’s Jack Jordan.
