Mashable has posted an interesting article on how Wall Street is looking to use data from social media to predict markets and ultimately influence trading decisions.
We’ve reported in the past about using Twitter to predict stockmarket movements, and the article explains why social media analysis will eventually become another tool in the process of investment decision making.
By itself, it is too open to abuse and is too unstructured, but together with traditional analysis could give early adopters a new advantage.
Perhaps the biggest potential lies with social media’s ability to reinforce or refute certain signals that ultimately lead to trading decisions. It’s akin to a friend giving the final arm-twist that drives you to order ice cream for dessert, or a helpful mentor saying you probably shouldn’t make that one decision. Social media wouldn’t be an adequate determinant by itself. But paired with all the other available information, it could nudge a set of observations into an actual decision.
If Wall Street ends up using social networks for this purpose, it would represent a shift in the role of automated and high-frequency trading and potentially earn a role for social media in the market.