Can Twitter Can Predict Stock Market Winners and Losers?

A recent study by Vagelis Hristidis and his team at University of California at Riverside suggests that Twitter is cracking the secret code of the stock market. There are 340 million Twitter posts per day. The study shows that the companies that are discussed the most perform stronger in the stock market.

The number of tweets posted about a company and the breadth of discussion topics where a company is mentioned both indicate stronger performance. A company that only centers on a few discussion topics and news items underperforms compared to its more popular competition.

Twitter Cracks the Code

The study was put to the test over a four-month trial. The stocks that Twitter predicted would be top performers lost 2.2% compared to the overall 4.2% loss for the Dow Jones Industrial Average. Other trade tricks and algorithms underperformed compared to the Twitter model as well.

What does this mean for Internet marketers? Social media is already more important than ever in driving traffic to a site. Sharing, liking, tweeting and retweeting are some of the most effective new ways to promote your business. Companies can increase their performance by not only posting about their business, but also through interacting across a broad range of Twitter discussions.

What do you think? Will this change the way Internet marketers implement their social media strategies?

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