KCSA PUBLIC RELATIONS, INVESTOR RELATIONS BLOG

Taming Twitter’s Bulls and Bears

Posted by on August 28th, 2015

In a July 2015 European Central Bank (ECB) report, researchers found, “Twitter bullishness has a statistically and economically significant predictive value in respect of share prices in the United States, the United Kingdom and Canada.” In fact, the study claims Twitter’s bullishness can even signal gains in daily returns the very next day.

To pull this data, ECB researchers analyzed the frequency, context and regions of tweets with the terms “bullish” and “bearish” and compared the findings to trends in the DJIA, FTSE 100, and GSPTSE indices.   Although the research methodology is not necessarily comprehensive, the report does call attention to the growing importance of Twitter as a financial communications tool.

First, as investors increasingly voice questions and concerns outside of quarterly conference calls, firms will face far more pressure to directly engage with investors via social media. Second, as social media measuring technologies continue to advance, companies will abandon many traditional investor perception studies for applications evaluating real-time Twitter data. In the same vein, if the ECB study’s findings hold true, innovations in social media sentiment analysis could even create unprecedented opportunities for the short selling community.