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Stock chatter: Using stock sentiment to predict price direction

Author

Listed:
  • Rechenthin, Michael

    (Department of Management Science, The University of Iowa)

  • Street, W. Nick

    (Department of Management Science, The University of Iowa)

  • Srinivasan, Padmini

    (Department of Computer Science, The University of Iowa)

Abstract

This paper examines a popular stock message board and finds slight daily predictability using supervised learning algorithms when combining daily sentiment with historical price information. Additionally, with the profit potential in trading stocks, it is of no surprise that a number of popular financial websites are attempting to capture investor sentiment by providing an aggregate of this negative and positive online emotion. We question if the existence of dishonest posters are capitalizing on the popularity of the boards by writing sentiment in line with their trading goals as a means of influencing others, and therefore undermining the purpose of the boards. We exclude these posters to determine if predictability increases, but find no discernible difference.

Suggested Citation

  • Rechenthin, Michael & Street, W. Nick & Srinivasan, Padmini, 2013. "Stock chatter: Using stock sentiment to predict price direction," Algorithmic Finance, IOS Press, vol. 2(3-4), pages 169-196.
    • Handle: RePEc:ris:iosalg:0012
    as

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    Citations

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    Cited by:

    1. Gusev, Maxim & Kroujiline, Dimitri & Govorkov, Boris & Sharov, Sergey V. & Ushanov, Dmitry & Zhilyaev, Maxim, 2014. "Predictable markets? A news-driven model of the stock market," MPRA Paper 58831, University Library of Munich, Germany.
    2. Yardley, Ben, 2020. "The Effects of Donald Trump’s Tweets on The Stock Exchange," MPRA Paper 102578, University Library of Munich, Germany.
    3. Damien Challet & Ahmed Bel Hadj Ayed, 2014. "Do Google Trend data contain more predictability than price returns?," Papers 1403.1715, arXiv.org.
    4. Jia‐Yen Huang & Jin‐Hao Liu, 2020. "Using social media mining technology to improve stock price forecast accuracy," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 39(1), pages 104-116, January.
    5. Yingying Xu & Zhixin Liu & Jichang Zhao & Chiwei Su, 2017. "Weibo sentiments and stock return: A time-frequency view," PLOS ONE, Public Library of Science, vol. 12(7), pages 1-21, July.
    6. Ashwini Saini & Anoop Sharma, 2022. "Predicting the Unpredictable: An Application of Machine Learning Algorithms in Indian Stock Market," Annals of Data Science, Springer, vol. 9(4), pages 791-799, August.
    7. Plakandaras, Vasilios & Papadimitriou, Theophilos & Gogas, Periklis & Diamantaras, Konstantinos, 2015. "Market sentiment and exchange rate directional forecasting," Algorithmic Finance, IOS Press, vol. 4(1-2), pages 69-79.
    8. Theophilos Papadimitriou & Periklis Gogas & Athanasios Fotios Athanasiou, 2020. "Forecasting S&P 500 spikes: an SVM approach," Digital Finance, Springer, vol. 2(3), pages 241-258, December.
    9. Pierpaolo D’Urso & Livia Giovanni & Riccardo Massari, 2021. "Trimmed fuzzy clustering of financial time series based on dynamic time warping," Annals of Operations Research, Springer, vol. 299(1), pages 1379-1395, April.

    More about this item

    Keywords

    prediction; classification; sentiment analysis; stock; equity; tweet; Yahoo finance; message boards;
    All these keywords.

    JEL classification:

    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General

    Statistics

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