Friday, June 8, 2012

Traders use social media big data trends as market analysis. From now on, only positive tweets!

I recently read this article in the Post about how financial analysts and traders are able to use information about what is trending on Twitter or Facebook to assist in their trading decisions. It is a great example of what is possible when harnessing big data.

It is also interesting from the perspective of market efficiency. It appears that the believers in harnessing social media trends for trading decision making, place less weight on underlying asset values as a predictor of future development, and instead focus on being able to predict the future direction of the herd. 

While this may not directly contradict the efficient market hypothesis, it may very well contribute to enhancing periods of market overconfidence or gloom.

In any case, from now on, only happy tweets!

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