The Tweeter Hedge Fund

Twitter-money-graph

Opalesque provides an in-depth report of the recently launched “Europe’s first social media-based Hedge Fund” 

On July 1st 2011, London based Derwent Capital Markets has launched the Derwent Absolute Return Fund which became known in the industry as the “Twitter Hedge Fund”. This highly anticipated hedge fund is Europe’s first to utilize sentiment derived from real-time social media data analysis. 

Most people are not aware that Derwent Capital’s investment approach is actually based on an academic paper by Johan Bollen, HuinaMao, Xiao-Jun Zeng called ‘Twitter mood predicts the stock market’ (http://arxiv.org/abs/1010.3003).

According to Bloomberg -who also reported on this back December, 2010-:

Zeng, Bollen and Mao’s research measured the public mood by searching Twitter posts from February to December 2008 for synonyms of and language related to six moods: calm, alert, sure, vital, kind and happy. The researchers then matched the time and date of these posts to closing prices of the Dow Jones Industrial Average to test their hypothesis that changes in the sentiments expressed online could predict future index values.

The fund will use algorithms based on the data extracted from Twitter posts and other factors to trade the FTSE 100, FTSE 250 and Dow Jones Industrial Average indexes as well as oil, gold and other precious metals and currencies.

You can also find an article published by hedgeco.com on this matter.

Following this trend, I´ve discovered the people at paris-based tweecker are developing a similar use into real-time trading

A Tweeck is a string starting by a dollar sign and followed by a ticker symbol (like $AAPL or $EURUSD). It can be an Index, a Stock Symbol or a Currency abbreviation.We stream statuses (messages) from a panel of 5000 active Tweeckers. Everytime a stock tweet (aka tweeck) is tweeted, we collect and analyse data allowing us to present you the following stats.

 

You can find further information on their findings http://www.tweecker.com/

 

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