Collective Prediction of Stock Market Indicators through Twitter

“I hope it is not as bad as I fear”

Xue Zhang, Hauke Fuehres, Peter A. Gloor

Massachusetts Institute of Technology, Center for Collective Intelligence

This paper describes early work trying to predict stock market indicators
such as Dow Jones, S&P 500, and NASDAQ by analyzing Twitter posts.
We collected the twitter feeds from one white listed IP for six months from
March 29, 2009 to Sept 7, 2009, ranging from 5680 to 42820 tweets per
day. According to twitter this corresponds to a randomized sub sample of
about one hundredth of the full volume of all tweets, as their total volume in
2009 was about 2,5 million tweets per day. We tried to measure collective
hope and fear on each day by applying the simple metric of counting all
tweets containing the words “hope” – there were 84 to 467 tweets per day,
and “fear” or “worry” – there were 16 to 89 tweets per day. This tells us
that people prefer optimistic words (hope) to pessimist words (fear or
worry).

As external benchmark of investor fear we used the Chicago Board

Options Exchange Volatility Index VIX, which is strongly negatively
correlated with Dow, S&P 500, and NASDAQ. Initially we expected the
number of tweets with hope to negatively correlate with VIX, and the
number of tweets with fear or worry to correlate positively with VIX.
Surprisingly, we found positive weak but insignificant correlation for both
“hope” (0.135) and “fear” or “worry” (0.172) with VIX, and negative
significant correlation with both “fear” and “worry” and “hope” with Dow
(0.262*) NASDAQ ( 0.214*) and S&P500 ( 0.255*). This means that people
start using more emotional words such as hope, fear, and worry in times of
economic uncertainty. We therefore created a simple twitter-volatility index
combining mentions of hope and fear, also factoring in the total amount of
tweets per day as a baseline. This index displays significant negative
correlations to Dow (0.672**) NASDAQ ( 0.663**) and S&P500 ( 0.657**),
and significant positive correlation to VIX (0.557**).

Download copies of COINs 2009 research and industry papers at

ScienceDirect.

1
Link: http://www.sciencedirect.com/science/issue/59087-2010-999979995-
2182758

Procedia - Social and Behavioral Sciences, Volume 2, Issue 4, The 1st

Collaborative Innovation Networks Conference - COINs2009. Edited by
Kenneth Riopelle, Peter Gloor, Christine Miller and Julia Gluesing.

Connect to the COINs 2010 Conference community across these media

platforms:

o COINs 2010 http://www.coins2010.com

o Facebook http://www.facebook.com/pages/Savannah-
GA/Collaborative-Innovation-Networks-COINS2010-
Conference/102489653133049
o Flickr http://www.flickr.com/photos/coinsconference/
o Livestream http://www.livestream.com/coinsconference
o Scribd http://www.scribd.com/SwarmCreativity
o Slideshare http://www.slideshare.net/IOpen2
o Twitter http://twitter.com/coins_2010
o Hashtag #COINS2010
o Vimeo http://www.vimeo.com/user4147060
o You Tube http://www.youtube.com/coinsconference

The COINs 2010 conference, Oct. 7–9, 2010, is presented by I-Open and
the COINs Collaborative, an initiative of the Savannah College of Art and
Design, Wayne State University College of Engineering Department of
Industrial and Manufacturing Engineering, and the Massachusetts Institute
of Technology Center for Collective Intelligence. The collaborative builds
open knowledge networks to advance the emerging science of
collaboration for research and industry competitive advantage. Hosted by
SCAD. For more information about the COINs 2010 conference, visit
www.coins2010.com.