Thursday, February 24, 2011

Twitter Tweets & Blogs Predicting the Markets?

Twitter
Socionomics: Moody Blogs and Tweets Give Hints about Financial Markets


Click here to reserve your seat for the first-ever Socionomics Summit April 16, 2011 in Atlanta, Georgia.

How would you like to analyze 10 million tweets posted on Twitter or more than 20 million blog posts on LiveJournal? Three of the speakers at the upcoming Socionomics Summit did. And what they learned tracking social media surprised them. As an interviewer on NPR put it, "It wasn't that the Dow Jones could be used to predict the mood on Twitter -- it was that Twitter could be used to predict the Dow Jones."

That's the new science of socionomics in a nutshell: Changes in social mood are precursors to both social events and to the ups and downs of the Dow Jones Industrial Average. Here's a quick look at four topics that speakers will explore at the 2011 Socionomics Summit: New Horizons in the Study of Social Mood that will be held on April 16, 2011, in Atlanta.

Twittery Moods -- Johan Bollen

If you want to know where the Dow is headed, simply read millions of tweets every day and pick out words and phrases that show calm, alert, and happy moods. Or do what Johan Bollen, associate professor of informatics at Indiana University and his colleagues did: Use computers to do the heavy lifting.

Bollen and Huina Mao will explain how they started their research into collective moods by asking this question: If emotions can profoundly affect individual behavior and decision-making, does this also apply to societies at large? That is, can societies experience mood states that affect their collective decision-making?

They analyzed how people reacted to the presidential election and Thanksgiving Day in 2008 via their Twitter posts. What Bollen, Mao and their associate, Xiao-Jun Zeng, learned is that public mood states can predict changes in the DJIA closing values two to six days in advance.

Blogger World - Eric Gilbert

Tweets are short and sweet; blog posts are longer and more detailed. Since holding the Google Fellowship in Social Computing at the University of Illinois, Dr. Eric Gilbert has been studying what makes social media tick and how people can use it to predict things such as relationship strength and stock prices. However, he could see that lab work didn't quite get to the heart of the matter. His research took off when he found that weblogs could provide a novel way to figure out what kind of moods people experience.

Gilbert, who is now on the faculty of the School of Interactive Computing at Georgia Tech, will discuss how he used LiveJournal to track more than 20 million blog posts. That research shows how increases in expressions of anxiety, worry and fear predicted downward pressure on the S&P 500 index. He will make the case that you can take information from social media -- just people discussing ordinary daily life -- to anticipate changes in seemingly unrelated systems: in this case, the stock market.

Hedge Fund Outside the Herd -- Scott Reamer

Once you notice that people succumb to herding when they invest in and trade stocks, wouldn't you want to put that knowledge to your advantage -- particularly if you were about to start a hedge fund? That's what Scott Reamer and his partners did in 2010 when they founded Chora Capital, based on quantitatively exploiting the propensity of investors to engage in herding across asset markets, geographies, and time.

Reamer will talk about how he sees socionomics as an investment philosophy that unifies economics, physics and sociology. He will explain how he and his partners started their venture by shooing away the "sacred cows of neoclassical theories,” then setting up a framework to understand how collective behaviors govern asset prices. As he puts it, “I think the socionomic principle allows you to at least go down a path [where] you can hopefully find tools or methodologies that allow you to take the reality that people herd, and apply it in a beneficial way for the industry and for your clients.”

Extreme Events - John Casti

People are getting used to extreme sports and the adrenaline rush they bring to participants -- and sometimes to spectators. Now get ready for extreme events in human society. John Casti, who recently wrote the book, "Mood Matters," calls them Xevents. He will argue that so-called Black Swans, rare and unexpected events, are not so impossible to predict. Casti, a research scholar at the International Institute for Applied Systems Analysis in Austria, believes that by using socionomics to predict social events it is possible to portray the topography of the ever-changing environment and to forecast the events that accompany it.

He will explain why the social mood of a population is a leading indicator of matters as amusing as trends in popular culture and matters as disruptive as the rise and collapse of world powers. If you want to be ahead of the crowd, it's time to find out how Casti proposes to use socionomics to create tools that anticipate such Xevents.

Click here to reserve your seat for the first-ever Socionomics Summit April 16, 2011 in Atlanta, Georgia.

The 14 speakers are a mix of academics and non-academics, so you'll not only learn about the latest developments in socionomic theory and research; you'll also see how expert socionomists are already applying socionomic insight to the fields of business and finance. It's certain to be the most thought-provoking meeting of the minds you've been to in the past decade or more. Learn more and reserve your seat today.