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Can social microblogging be used to forecast intraday exchange rates?

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  • Panagiotis Papaioannnou
  • Lucia Russo
  • George Papaioannou
  • Constantinos Siettos
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    Abstract

    The Efficient Market Hypothesis (EMH) is widely accepted to hold true under certain assumptions. One of its implications is that the prediction of stock prices at least in the short run cannot outperform the random walk model. Yet, recently many studies stressing the psychological and social dimension of financial behavior have challenged the validity of the EMH. Towards this aim, over the last few years, internet-based communication platforms and search engines have been used to extract early indicators of social and economic trends. Here, we used Twitter's social networking platform to model and forecast the EUR/USD exchange rate in a high-frequency intradaily trading scale. Using time series and trading simulations analysis, we provide some evidence that the information provided in social microblogging platforms such as Twitter can in certain cases enhance the forecasting efficiency regarding the very short (intradaily) forex.

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    File URL: http://arxiv.org/pdf/1310.5306
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    Paper provided by arXiv.org in its series Papers with number 1310.5306.

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    Date of creation: Oct 2013
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    Publication status: Published in Netnomics, 14, 47-68 (2013)
    Handle: RePEc:arx:papers:1310.5306

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    Web page: http://arxiv.org/

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