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When can social media lead financial markets?

Zheludev, Ilya, Smith, Robert and Aste, Tomaso (2014) When can social media lead financial markets? Scientific Reports, 4 (4213). ISSN 2045-2322

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Identification Number: 10.1038/srep04213


Social media analytics is showing promise for the prediction of financial markets. However, the true value of such data for trading is unclear due to a lack of consensus on which instruments can be predicted and how. Current approaches are based on the evaluation of message volumes and are typically assessed via retrospective (ex-post facto) evaluation of trading strategy returns. In this paper, we present instead a sentiment analysis methodology to quantify and statistically validate which assets could qualify for trading from social media analytics in an ex-ante configuration. We use sentiment analysis techniques and Information Theory measures to demonstrate that social media message sentiment can contain statistically-significant ex-ante information on the future prices of the S&P500 index and a limited set of stocks, in excess of what is achievable using solely message volumes.

Item Type: Article
Official URL:
Additional Information: © 2014 Macmillan Publishers Limited
Divisions: LSE
Subjects: H Social Sciences > H Social Sciences (General)
H Social Sciences > HC Economic History and Conditions
H Social Sciences > HJ Public Finance
Date Deposited: 01 Jul 2014 15:34
Last Modified: 16 May 2024 01:52
Projects: ES/K002309/1
Funders: Economic and Social Research Council

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