By |Published On: April 2nd, 2018|Categories: Basilico and Johnsen, Academic Research Insight|

Company Event Popularity for Financial Markets using Twitter and Sentiment Analysis

  • Mariana Daniel, Rui Ferreira Neves, Nuno Horta
  • Expert Systems with Applications, 2017
  • A version of this paper can be found here
  • Want to read our summaries of academic finance papers? Check out our Academic Research Insight category.

What are the research questions?

By studying tweets on thirty companies in the Dow Jones Index, the authors ask the following research question:
  1. Is it possible to develop a system for the detection and discovery of the popularity of special events on Twitter that may influence the financial markets?

What are the Academic Insights?

The system devised by the authors is composed of five steps:

  • Identification of the financial community by identifying relevant users ( those with more followers than users followed) based on 10 influencers
  • Filtering of the tweets based on Investopedia financial dictionary
  • Definition of sentiment by using four text analysis tools ( MySentiment Api, TextBlob, SentiStrenght and Affin)
  • Normalization by volume
  • Event detection

The authors study over 12 million tweets from 9,000 users over 710 days ( from September 2013 and September 2015). Of these tweets, only 192,935 (those with content relevant to the financial markets) are analyzed.

The three case studies presented in the paper (Apple, Microsoft and Walmart) are examples of the efficiency of the model in dealing with massive amounts of data and very high levels of noise typical of social networks.

Why does it matter?

While this is not the typical paper that researches relations between data and market performance, it shows the details of how to approach sentiment analysis on Twitter starting from the definition of a relevant community of users down to the definition of a popular company event.

The Most Important Chart from the Paper:

The results are hypothetical results and are NOT an indicator of future results and do NOT represent returns that any investor actually attained. Indexes are unmanaged, do not reflect management or trading fees, and one cannot invest directly in an index.

Abstract

The growing number of Twitter users makes it a valuable source of information to study what is happening right now. Users often use Twitter to report real-life events. Here we are only interested in following the financial community. This paper focuses on detecting events popularity through sentiment analysis of tweets published by the financial community on the Twitter universe. The detection of events popularity on Twitter makes this a non-trivial task due to noisy content that often are the tweets. This work aims to filter out all the noisy tweets in order to analyze only the tweets that influence the financial market, more specifically the thirty companies that compose the Dow Jones Average. To perform these tasks, in this paper it is proposed a methodology that starts from the financial community of Twitter and then filters the collected tweets, makes the sentiment analysis of the tweets and finally detects the important events in the life of companies.

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About the Author: Wesley Gray, PhD

Wesley Gray, PhD
After serving as a Captain in the United States Marine Corps, Dr. Gray earned an MBA and a PhD in finance from the University of Chicago where he studied under Nobel Prize Winner Eugene Fama. Next, Wes took an academic job in his wife’s hometown of Philadelphia and worked as a finance professor at Drexel University. Dr. Gray’s interest in bridging the research gap between academia and industry led him to found Alpha Architect, an asset management firm dedicated to an impact mission of empowering investors through education. He is a contributor to multiple industry publications and regularly speaks to professional investor groups across the country. Wes has published multiple academic papers and four books, including Embedded (Naval Institute Press, 2009), Quantitative Value (Wiley, 2012), DIY Financial Advisor (Wiley, 2015), and Quantitative Momentum (Wiley, 2016). Dr. Gray currently resides in Palmas Del Mar Puerto Rico with his wife and three children. He recently finished the Leadville 100 ultramarathon race and promises to make better life decisions in the future.

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Important Disclosures

For informational and educational purposes only and should not be construed as specific investment, accounting, legal, or tax advice. Certain information is deemed to be reliable, but its accuracy and completeness cannot be guaranteed. Third party information may become outdated or otherwise superseded without notice.  Neither the Securities and Exchange Commission (SEC) nor any other federal or state agency has approved, determined the accuracy, or confirmed the adequacy of this article.

The views and opinions expressed herein are those of the author and do not necessarily reflect the views of Alpha Architect, its affiliates or its employees. Our full disclosures are available here. Definitions of common statistics used in our analysis are available here (towards the bottom).

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