Study Finds that Twitter Can Predict the Stock Market

A new study found that Twitter messages could predict trends in the stock market -- and may have uses for other predictions, too.

By Kathryn Hawkins. Posted on November 02 2010

If you need a real-time look at the world’s mood, there’s no better place to look than Twitter. The micro-blogging platform currently has more than 100 million users worldwide, who post messages about everything from recipes to politics to (ahem) good news. But aside from debating the latest Lady Ga Ga video and sharing photos of your Halloween costume, what is it useful for?

Quite a bit, according to a new study from University of Indiana – in fact, they claim that analyzing Twitter messages gave them the ability to predict the rise and fall of the stock market. Rather than monitoring for specific brand names, the researchers paid close attention to the general mood of Twitter users – whether they seemed happy or sad, fearful or optimistic. They created search queries for specific phrases, like “I am happy”, then compiling all of the messages to create a daily “Twitterverse” mood score.

They found that when the general mood was calm, the stock market would rise; when people were anxious or upset, it would fall. The Twitterverse was rarely wrong: shifts in mood predicted stock market shifts with almost 90 percent accuracy.

While stock speculation may excite some, there are all sorts of other, world-changing applications for Twitter predictions, claim the researchers.

“The electronic data that has recently become available to scientists gives us unprecedented new clues into the spread of disease, how people should evacuate a city or how the stock market behaves,” said Brian Uzzi, a professor at Northwestern University who focuses on social media.

Soon, no matter what you want to know, the answer may be just a Tweet away.

Filed under: Science, Weird,

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