What if we can actually speak things into existence? Essentially saying, let there be light and then the sun fills the sky. Well, today we are witnessing a collective voice online, I call it the voice of humanity that comes close to speaking things into existence. This collective voice is currently moving products, services, brands, and a multitude of issues on the social web. So, the social web has provided the platform for all humanity to freely engage in the exchange of thoughts and ideas about any given topic.
Typing a simple query on a social media search engine like www.sampoint.com will deliver individual comments that make up this collective voice of humanity online. However, it is yet to be seen if and how this collective voice is able to move the financial markets, stock by stock.
As an investment professional with over 15 years of investing in stocks and various derivatives, I am witnessing the ability of this collective voice online to influence the direction of financial securities. In the mid to late 1990’s we witnessed how mass emails and faxes about Over the Counter securities (i.e. Penny Stocks) were able to produce significant short term gains and losses.
Today the authors of those emails and faxes are establishing their presence on the greatest publishing platform in the world; the social websites, and message boards. These authors are joined by many other individual and professional investors voicing their thoughts and ideas about targeted financial securities and other investments. Samepoint’s Universal API enables companies to create customizable dashboards to enable individual investors and financial professionals like myself to track and trend current and historical comments on various securities. This essentially allows us to identify any correlation with stock price and volume changes to gain from any arbitrage opportunities. With the stock options market being predominantly driven by volatility, the ever changing sentiment and frequency of comments may very well be a crucial component in predicting volatility on any given financial security.
The possibility of using social media comments to drive investment decisions is not going unrecognized. In fact, it was recently announced that a new Hedge Fund, affectionately named the ‘Twitter Fund’, will be launched in February, 2011 and will leverage the sentiments of Twitter comments to drive investment decisions. This new fund will be officially marketed to clients as the Derwent Absolute Return Fund, and has already attracted at least £25 million in investments, according to the fund’s manager Paul Hawtin. In addition, it is claimed that the fund’s management is in discussions to hire John Bollen, an Indiana University professor who has championed academic theories linking market performance to Twitter moods. The so called ‘Twitter moods’ are actually sentiments of the social media comments and are tagged as positive, negative, or neutral.
So, as the influence of social media comments increases, I firmly believe there will be more undertakings in the investment community to leverage that collective voice of humanity online to drive investment decisions. This will be, in essence, a validation of the age old philosophy that the stock market is truly controlled by emotions or, in a sense, sentiments.
