How much power can be gained from 140 characters you wonder? Well in the case of the Derwent Capital Hedge Fund market an awful lot. In May this year Derwent Capital Hedge Fund started trading using algorithms and a trading model that follow comments posted on Twitter.
Paul Hawtin who is the hedge fund manager of Derwent stated that “For years investors have widely accepted that financial markets are driven by fear and greed but we’ve never before had the technology or data to be able to quantify human emotions.” Now we do. This newly developed algorithm allows is based on a research paper from the University of Manchester and Indian University which concluded that there was a strong correlation between the mood on Twitter and the rise/fall of stock and commodity prices in the FTSE 100 and the Dow Jones. There are now 175 million users on Twitter producing around 95 million posts per day, a pot of gold for data analysts and mathematicians who have already started to find new ways to analyse rapidly growing source of real time data. (more…)