

Twitter Predicts DOW - quantboy
http://arxiv.org/PS_cache/arxiv/pdf/1010/1010.3003v1.pdf

======
conjectures
Great idea for a study.

I think there's a mistake with the early discussion of the efficient markets
hypothesis though.

"There are two problems with EMH. First, numerous studies show that stock
market prices do not follow a random walk and can indeed to some degree be
predicted [5], [6], [7], [8]."

Any bets 5, 6, 7 & 8 have now been factored into financial trading models
cancelling out the predictive advantage?

I think it only makes sense to think of EMH as a dynamic rule. With new
information (/new ways of understanding old information) disrupting the
equilibrium price which then converges to a long term equilibrium; at least
until the next shock.

I'd apply this on every level from the technology arms race to new sources of
info & analytical models (such as twitter + NLP).

------
charlief
Interesting paper, but the data set is poor, limited, and during the height of
the crisis in 2008. I bet calm alert and happy were highly correlated to daily
movements then. The model would have a much higher error rate if sampled from
2009 and 2010.

------
udfalkso
If they really believed this could work, they wouldn't have told anyone about
it. They'd have been too busy swimming in $$$.

~~~
charlief
The key is in the model, and besides general details, the paper doesn't
explain much. This paper is a form of marketing if anything.

------
Anon84
Where is this published?

