First Social Media-based Hedge Fund Opens Doors
Derwent Capital Markets, a London investment firm that has long been touting itself as the first social media-based hedge fund, has opened its doors.
- The £25 milllion ($40.5 milion) hedge fund is basing investments on an analysis of 10% of the 10 million tweets sent daily.
- The firm applies trading algorithms and sentiment analysis to those tweets before making its bets.
The concept of using social media as stock market predictor
- Derwent is the first boutique investment firm to take this approach but not the first one to use this concept
- StockTwits, a third-party Twitter app, provides a forum to discuss investment-related matters.
- Chart.ly and Covestor are among others.
- Students at Cornell also authored a paper, which found that monitoring sentiment in tweets yielded was 87.8% accurate in predicting the “daily up and down changes in the closing values” of the Dow Jones Industrial Average.
- A fund starting up in Japan will base its investments on sentiment found by analyzing blogs.