TWITTER can be an accurate predictor of the stock market, according to a British company that is launching the world’s first social media-influenced trading platform.
Derwent Capital Markets (DCM) is opening the spreadbetting platform today, after winning approval from the Financial Services Authority last year.
The platform includes a feed detailing social media “sentiment”, which analyses data from Twitter, Facebook and other channels to give 250 stocks and major foreign exchange pairs a positivity rating of one to 100.
“Today, social media creates a vast amount of information and it has been proven that the sentiment derived from it can predict stock market movements,” DCM’s founder and chief executive Paul Hawtin said. “For the very first time, we are connecting this information source to the trading community, opening up the universe of social media data so traders can make more informed buying and selling decisions.”
The launch of the trading platform, called DCM Dealer, comes after DCM opened a £25m hedge fund influenced by social media sentiment. The fund reportedly returned 1.86 per cent within a month – ahead of the market and other funds – which led the company to close the fund and create a mass-market product.
The fund was opened following US researchers claiming that Twitter sentiment had an 87.6 per cent chance of predicting whether the Dow Jones index would fall or rise on any particular day.