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.
- 17 may 2011
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 Bollen, Huina Mao, Xiao-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%.