Work detail

Predictability of security returns using Twitter sentiment

Author: Mgr. Marek Fremunt
Year: 2015 - summer
Leaders: doc. PhDr. Jozef Baruník Ph.D.
Consultants:
Work type: Finance, Financial Markets and Banking
Masters
Language: English
Pages: 92
Awards and prizes:
Link: https://is.cuni.cz/webapps/zzp/detail/151812/
Abstract: This work concentrates on exploring the influence of social networks to financial markets. We
have introduced a novel approach to Twitter sentiment analysis, in which we collect continuous
stream of data and analyze it. Our original data set contains over 200 million English written
Tweets from the period between July 1, 2014 and October 9, 2014. Twitter sentiment is used as
a good representative of investors' mood. On hourly data we investigate how investors are
influenced by basic emotions, moods and sentiment in their decision making processes as well
as the influence of keywords related to specific securities and FOREX symbols. Particularly, we
examine the relationships between Twitter-based variables and returns as well as volatility of
several financial instruments on a wide range of data including commodities, currencies and
S&P 500 Cash Index. We show that Twitter sentiment influences volatility of securities' returns,
tested and shown on both conditional and realized volatility models. We also describe the effect
of Twitter sentiment on securities' returns. Moreover, we reveal the influence of basic emotions
on investors' decision making processes. Our results suggest that investors are influenced by
emotions and moods, especially at longer investment horizons. The impact of emotions at
shorter investment horizons is limited and differs for particular securities as well as emotions.

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