Analysing social media posts to improve investment decisions

According to the WSJ, Wall Street has a growing desire to find different data – such as social media posts – that can help improve investment decision making, to make predictions about the movements of stocks and other securities and derivatives.

Many sentiment-analysis startups scan Twitter and other social media, but the ability to analyse posts to identify subtle trends is still in development. Social media can provide a useful signal to investors but generally shouldn’t be relied on as the sole reason to make an investment.

Used techniques

There are different techniques to drive market insights:

  1. Break down sentences into their key components and analyse adjectives and actions associated with subjects mentioned in tweets, as well as their location in sentences, among other factors.
  2. Identify situations where a person may convey both a negative and a positive in a single utterance.
  3. Examine not only the meaning of words but also their arrangement in relation to each other.

Twitter Inc. itself also sells data directly to a range of businesses, including hedge funds and banks. Some of those buyers have data scientists who conduct their own analysis of tweets, including of sentiment around companies.

 

 

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