Twitter Can Predict the Stock Market
- By Lisa Grossman
- October 19, 2010
The emotional roller coaster captured on Twitter can predict the ups and downs of the stock market, a new study finds. Measuring how calm the Twitterverse is on a given day can foretell the direction of changes to the Dow Jones Industrial Average three days later with an accuracy of 86.7 percent.
“We were pretty astonished that this actually worked,” said computational social scientist Johan Bollen of Indiana University-Bloomington. The new results appear in a paper on the arXiv.org preprint server.
Bollen and grad student Huina Mao stumbled on this computational crystal ball almost by accident. Earlier studies had found that blogs can be used to gauge public mood, and that tweets about movies can predict box office sales. An open source mood-tracking tool called OpenFinder sorts tweets into positive and negative bins based on emotionally charged words.
But Bollen wanted to build a more nuanced emotional barometer. He used a standard psychology tool called the Profile of Mood States, a quick questionnaire that is used frequently in pharmaceutical research or sports medicine.
The original questionnaire asks people to rate how closely their feelings match 72 different adjectives, including “friendly,” “peeved,” “active,” “on edge” and “panicky,” and uses the responses to measure mood along six dimensions: calmness, alertness, sureness, vitality, kindness and happiness.
