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Predicting Financial Markets: Comparing Survey, News, Twitter and Search Engine Data

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  • Huina Mao
  • Scott Counts
  • Johan Bollen
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    Abstract

    Financial market prediction on the basis of online sentiment tracking has drawn a lot of attention recently. However, most results in this emerging domain rely on a unique, particular combination of data sets and sentiment tracking tools. This makes it difficult to disambiguate measurement and instrument effects from factors that are actually involved in the apparent relation between online sentiment and market values. In this paper, we survey a range of online data sets (Twitter feeds, news headlines, and volumes of Google search queries) and sentiment tracking methods (Twitter Investor Sentiment, Negative News Sentiment and Tweet & Google Search volumes of financial terms), and compare their value for financial prediction of market indices such as the Dow Jones Industrial Average, trading volumes, and market volatility (VIX), as well as gold prices. We also compare the predictive power of traditional investor sentiment survey data, i.e. Investor Intelligence and Daily Sentiment Index, against those of the mentioned set of online sentiment indicators. Our results show that traditional surveys of Investor Intelligence are lagging indicators of the financial markets. However, weekly Google Insight Search volumes on financial search queries do have predictive value. An indicator of Twitter Investor Sentiment and the frequency of occurrence of financial terms on Twitter in the previous 1-2 days are also found to be very statistically significant predictors of daily market log return. Survey sentiment indicators are however found not to be statistically significant predictors of financial market values, once we control for all other mood indicators as well as the VIX.

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    File URL: http://arxiv.org/pdf/1112.1051
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    Bibliographic Info

    Paper provided by arXiv.org in its series Papers with number 1112.1051.

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    Date of creation: Dec 2011
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    Handle: RePEc:arx:papers:1112.1051

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    Web page: http://arxiv.org/

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    1. Werner Antweiler & Murray Z. Frank, 2004. "Is All That Talk Just Noise? The Information Content of Internet Stock Message Boards," Journal of Finance, American Finance Association, American Finance Association, vol. 59(3), pages 1259-1294, 06.
    2. Kahneman, Daniel & Tversky, Amos, 1979. "Prospect Theory: An Analysis of Decision under Risk," Econometrica, Econometric Society, Econometric Society, vol. 47(2), pages 263-91, March.
    3. Paul C. Tetlock, 2007. "Giving Content to Investor Sentiment: The Role of Media in the Stock Market," Journal of Finance, American Finance Association, American Finance Association, vol. 62(3), pages 1139-1168, 06.
    4. Zhi Da & Joseph Engelberg & Pengjie Gao, 2011. "In Search of Attention," Journal of Finance, American Finance Association, American Finance Association, vol. 66(5), pages 1461-1499, October.
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    Cited by:
    1. Felix Ming Fai Wong & Zhenming Liu & Mung Chiang, 2014. "Stock Market Prediction from WSJ: Text Mining via Sparse Matrix Factorization," Papers 1406.7330, arXiv.org.

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