predicting the future with the news

The New York Times reports:

The number-crunchers on Wall Street are starting to crunch something else: the news.

Math-loving traders are using powerful computers to speed-read news reports, editorials, company Web sites, blog posts and even Twitter messages — and then letting the machines decide what it all means for the markets.

The development goes far beyond standard digital fare like most-read and e-mailed lists. In some cases, the computers are actually parsing writers’ words, sentence structure, even the odd emoticon. A wink and a smile — ;) — for instance, just might mean things are looking up for the markets. Then, often without human intervention, the programs are interpreting that news and trading on it.

New York Times: Computers That Trade on the News

And Bloomberg reports:

Derwent Capital Markets, a family- owned hedge fund, will offer investors the chance to use Twitter Inc. posts to gauge the mood of the stockmarket, said co-owner Paul Hawtin.

The Derwent Absolute Return Fund Ltd., set to start trading in February with an initial 25 million pounds ($39 million) under management, will follow posts on the social-networking website. A trading model will highlight when the number of times words on Twitter such as “calm” rise above or below average.

Bloomberg: Hedge Fund Will Track Twitter to Predict Stock Moves

See also:

Sentiment analysis

Technical analysis