trading is a pretty advanced process now, with many traders using
algorithms to either advise them or in a rising number of cases, to
actually do the trading for them. Most of these algorithms are logical
however, in that they use hard mathematics to produce their
recommendations. Can social media sentiment analysis play a part in
That's the question that the New York Stock Exchange hope to answer. They announced recently
that they are teaming up with Social Market Analytics (SMA) to
distribute sentiment statistics from SMAs social monitoring tool through
the NYSE data feed.
The social data will offer traders
additional social data alongside their normal financial metrics. SMA's
service provides real-time analysis of social mentions in an attempt to
predict volatility in stocks and sectors via the level of social
SMA's engine seeks to create a social
media signature, consisting of seven statistical indicators: S-Score,
S-Mean, S-Delta, S-Volatility, S-Buzz, and S-Dispersion, which may allow
customers to track relative sentiment, in addition to volume, change,
and dispersion of social media commentary.
is monitoring what is being said on Twitter now. SMA offers firms the
right tool for the job with data that consists of clear, quantified,
actionable intelligence on social media sentiment," said Tom Watson, Vice President, Global Market Data, NYSE Technologies. "We
believe this will change the way the financial sector thinks about
social media. For the first time, trading firms, brokers, asset
managers, and non-financials in every sector will have a measurable way
to track the sentiment of the social media stream of consciousness.""Social
Media is already a large but still rapidly growing means of
communication and efficient global interaction. Many of these
conversations discuss companies, stocks and market activity, but until
now there hasn't been a way to collect and quantify this data," said Joe Gits, CEO of SMA. "Our
process is unique in this emerging field both in its approach to
filtering social media data and in the analytical methodology used to
develop our proprietary metrics. We are excited to be working with NYSE
Technologies to offer this service to a wide range of clients delivered
quickly and cost-effectively over the SFTI network."
Can social map to share prices?
This isn't a new idea. Last year social research company Sociagility
released a study showing that social signals were a good indicator of stock performance.
“Higher social media performance scores were associated with positive changes in share price,” Sociagility said in a statement.
course, many more data points would be required to determine whether or
not this represents a real or consistent lead indicator,” the report
cautions. “However, the presence of any such statistically significant
correlations between social media performance and share price movements
should certainly embolden corporate communications directors to go to
their CEOs and CFOs and say: ‘Look, this matters, and I need more
resources to do it properly.’”
That study was of
course measuring how social management correlates to strong share
performance. So it wasn't looking at social signals per se. That said
however, social mentions have been used to track flu and other
epidemics, so it will be interesting to see if social can also provide
an indicator into the hive nature of stock trading.