World’s First Twitter-Led Hedge Fund Opens

London-based investment boutique Derwent Capital Markets are claiming to have created Europe’s first social media-based hedge fund.

London-based investment boutique Derwent Capital Markets are claiming to have created Europe’s first social media-based hedge fund. Launched today, the £25 million private investment fund draws on real-time sentiment analysis to gauge insight into global fear and greed within the financial markets.  Trading algorithms are used alongside a sentiment-analysis system which according to NewScientist ‘uses natural-language processing techniques to quantify the sentiment expressed in around 10 per cent of the 100 million tweets that are sent daily.’

Last year Johan BollenHuina MaoXiao-Jun Zeng – three Computer Science students of  Cornell University, submitted a paper discussing the correlation between ‘collective mood states’ taken from Twitter and the Dow Jones Industrial Average.  The research returned;

an accuracy of 87.6% in predicting the daily up and down changes in the closing values of the DJIA and a reduction of the Mean Average Percentage Error by more than 6%.

Derwent Capital Markets launches Europe’s first social media-based hedge fund (PDF)

[via NewScientist]

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