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Author Topic: Twitter Can Predict The Stock Market  (Read 3544 times)
Galaxia
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« on: October 19, 2010, 10:54:03 am »

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Analyzing almost 10 million tweets, research finds public mood can predict Dow days in advance

Measurements of the collective public mood derived from millions of tweets can predict the rise and fall of the Dow Jones Industrial Average up to a week in advance with an accuracy approaching 90 percent, Indiana University information scientists have found.


Researchers at IU Bloomington's School of Informatics and Computing found the correlation between the value of the Dow Jones Industrial Average (DJIA) and public sentiment after analyzing more than 9.8 million tweets from 2.7 million users during 10 months in 2008.

Using two mood-tracking tools to analyze the text content of the large-scale collection of Twitter feeds, Associate Professor Johan Bollen and Ph.D. candidate Huina Mao were able to measure variations in public mood and then compare them to closing stock market values.

One tool, OpinionFinder, analyzed the tweets to provide a positive or negative daily time series of public mood. The second tool, Google-Profile of Mood States (GPOMS), measured the mood of tweets in six dimensions: calm, alert, sure, vital, kind, and happy. Together, the two tools provided the researchers with seven public mood time series that could then be set against a similar daily time series of Dow Jones closing values.

The researchers then correlated the two sets of values -- Dow Jones and public mood -- and used a self-organizing network model to test a hypothesis that predicting stock market closing values could be improved by including public mood measurements.

"We were not interested in proposing an optimal Dow Jones prediction model, but rather to assess the effects of including public mood information on the accuracy of the baseline prediction model," Bollen said. "What we found was an accuracy of 87.6 percent in predicting the daily up and down changes in the closing values of the Dow Jones Industrial Average."

By implementing a prediction model called a Self-Organizing Fuzzy Neural Network (SOFFNN) similar to one already used to successfully forecast electrical load needs, the researchers were able to demonstrate that public mood had the ability to significantly improve the accuracy of the most basic models currently in use to predict Dow Jones closing values. Bollen described this particular SOFFNN as a five-layer hybrid neural network with the ability to self-organize its own neurons during a learning process that included information of past Dow Jones and public mood time series values.

"Given the performance increase for a relatively basic model such as the SOFNN, we are hopeful to find equal or better improvements for more sophisticated market models that may in fact include other information derived from news sources and a variety of relevant economic indicators," he said.

The researchers found the OpinionFinder positive/negative sentiment input had no effect on prediction accuracy, while the Calm and the Calm-Happy combination of the GPOMS had the highest prediction accuracy.

"In fact, the calmness index appears to be a good predictor of whether the Dow Jones Industrial Average goes up or down between two and six days later," Bollen said.

The odds of the prediction accuracy rate of 87.6 percent being sheer chance were then calculated for a random period of 20 days and determined to be just 3.4 percent.

More information: The research paper is available for download here.
http://www.physorg.com/news/2010-10-million-tweets-mood-dow-days.html

Reminds me of the webbot project which works the same way, but with the whole internet. It supposedly predicted 9/11, Katrina and the recession.
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« Reply #1 on: October 24, 2010, 10:08:49 pm »

Twitter predicting the course of the stock market makes some sense, with stocks and public opinion or confidence linked.  9/11 and Katrina were predicted, huh?
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Galaxia
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« Reply #2 on: October 25, 2010, 12:27:45 am »

http://en.wikipedia.org/wiki/Web_Bot_Project

It's been right as many times as it's been wrong.
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« Reply #3 on: October 25, 2010, 09:33:08 pm »

As a critic points out, it's funny how the predictions are always negative.  Being based on the internet as a whole, I guess that could be taken to mean people in general just aren't that optimistic about the future.  The prophecies themselves make me think more of Nostradamus than science.
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Galaxia
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« Reply #4 on: October 25, 2010, 09:34:58 pm »

Humanity as a whole hasn't been optimistic about the future since the Space Age died.
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« Reply #5 on: October 25, 2010, 11:33:56 pm »

Having increasingly wider, faster access to news (often of a negative nature) wouldn't help with optimism, either.  Predictions of bad things in 2012 aren't exactly surprising, since the net would be full of talk about it to begin with.  The Mayans themselves never said anything bad was going to happen, of course.

http://en.wikipedia.org/wiki/2012_phenomenon
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Galaxia
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« Reply #6 on: October 26, 2010, 01:07:07 am »

Can't forget Y2k, remember how every electronic device was going to fail and we'd be plunged back into the stone age?
A local church group mailed out fliers claiming that the Apocalypse would begin on 6/6/06. I still have it around here somewhere.
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« Reply #7 on: October 26, 2010, 02:09:35 am »

I know of another church that used to say that Jesus would return in 1975, after other events occurred.  Yeah, people were freaking out over computers, but it made for a good episode of Family Guy.  People have been awaiting the end of the world for centuries, thinking it's right around the corner.
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Galaxia
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« Reply #8 on: October 26, 2010, 04:57:06 pm »

I love that Treehouse of Horror where Homer's the only one who forgot to upgrade his computer, so everything goes to Hell.

I can't understand people who take those predictions seriously. People have been certain they knew the day Jesus was coming back since the day after the resurrection.
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« Reply #9 on: October 27, 2010, 12:47:03 am »

There will always be another date or year when people expect the end of the world.  Once 2012 is over with, I suppose 2020 would be next.
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Galaxia
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« Reply #10 on: October 27, 2010, 10:27:18 am »

http://en.wikipedia.org/wiki/Year_2038_problem
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« Reply #11 on: October 27, 2010, 04:59:49 pm »

That's eerily familiar, though more complicated to fix than Y2K.
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Galaxia
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« Reply #12 on: October 27, 2010, 06:52:03 pm »

We've got 28 years to fix it. I wouldn't worry about it.
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« Reply #13 on: October 27, 2010, 08:31:10 pm »

Shouldn't be a big deal, unless the world is incredibly slow in upgrading and replacing old software and systems.  Wonder if Windows will still dominate the market 28 years from now.
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Galaxia
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« Reply #14 on: October 27, 2010, 08:55:37 pm »

I'd doubt if we're even using the same sort of computers 28 years from now. My phone can do everything a laptop can do. There's really no need for a desktop now except for word processing and storage.
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