Dow Jones can be predicted from tweets

We’re really not sure we should be sharing this information, but the TechEye stock portfolio is riding high at the moment and we’re feeling generous.

We’ve made millions in the last couple of weeks – so the office outing to Rio is back on and we shan’t need to sell the racehorses – simply by monitoring Twitter.

You might think that public mood would trail the stock market. People get rich, they cheer up. But according to some now-very-wealthy researchers at Indiana University, it works the other way round.

Using two mood-tracking tools to analyse the text content of nearly ten million tweets, associate professor Johan Bollen and PhD candidate Huina Mao looked at how chirpy Twitterers were feeling and compared the results to Dow Jones closing stock market values.

One tool, OpinionFinder, analysed the tweets as positive or negative. The second, Google-Profile of Mood States (GPOMS), categorised tweets as either calm, alert, sure, vital, kind or happy.

They then used a prediction model called a Self-Organizing Fuzzy Neural Network (SOFNN) – similar to one used to forecast electrical load needs – to see whether stock market closing values could be predicted from the mood of Twitter users.

“What we found was an accuracy of 87.6 percent in predicting the daily up and down changes in the closing values of the Dow Jones Industrial Average,” Bollen said, checking his Rolex impatiently.

“Given the performance increase for a relatively basic model such as the SOFNN, we are hopeful to find equal or better improvements for more sophisticated market models.”

After all, he has six houses to maintain.

The researchers found the OpinionFinder positive/negative sentiment input wasn’t much of a predictor, but that the Calm and the Calm-Happy combination of the GPOMS were.

“In fact, the calmness index appears to be a good predictor of whether the Dow Jones Industrial Average goes up or down between two and six days later,” Bollen said.

The guys have shown a lot more sense than Webtrends, which recently used similar techniques to work out who was likely to be the next Big Brother evictee.

“We had a punt in the office with it, and cumulatively built up some winnings, but we didn’t get rich,” said a spokesman. He added that they were having another shot with X Factor – and the money’s on Wagner to win.