Can Twitter Predict the Stock Market?

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Next time you play the stock market, it might be worth checking out Twitter beforehand. New research out of the Indiana University-Bloomington shows the mood of tweets can predict how the Dow Jones Industrial Average will move by almost 90% accuracy up to six days ahead of time.

By using two Twitter mood tracking tools, OpinionFinder and Google Profile of Mood States, researchers examined 9.8 million tweets that included the words “I feel” or “I’m feeling” between February and December 2008.  Not only did emotional data increase the accuracy of the market predictions, but it also allowed researchers to determine that Twitter calmness is a large predictor of which way the stocks will go.

This isn’t the first time Twitter has been used to examine emotion — others included election day and holidays such as Christmas and Thanksgiving.

But before you start using Twitter as your crystal ball for manipulating the markets,  the study’s researchers acknowledged that this isn’t the most accurate algorithm for stock prediction possible. They also said while “calmness” on twitter might predict market movements, it doesn’t necessarily cause them. (via Wired)

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