econintersect.com
       
  

FREE NEWSLETTER: Econintersect sends a nightly newsletter highlighting news events of the day, and providing a summary of new articles posted on the website. Econintersect will not sell or pass your email address to others per our privacy policy. You can cancel this subscription at any time by selecting the unsubscribing link in the footer of each email.



posted on 13 November 2015

How Twitter Can See The Financial Future And Change It

from The Conversation

-- this post authored by Costas Milas, University of Liverpool

Scottish financial trader James Alan Craig has been charged in the US for allegedly using Twitter to manipulate share prices. According to the US Department of Justice, the 62 year old, from Dunragit in Dumfries and Galloway, caused shareholders to lose more than $1.6m (£1.1m) after allegedly spreading "fraudulent" information about companies on the social network. According to newspaper reports, the DoJ has charged him with securities fraud, while the Securities and Exchange Commission has filed a separate complaint charging him with the same offence.

Most of us would probably find it very hard to believe that information on the likes of Twitter, Facebook or Google Blogs might have the power to influence financial markets, but this is not the first time such a story has hit the news. Astonishingly, a fake tweet on April 23 2013 from a hacked Associated Press account, asserting that explosions at the White House had injured Barack Obama, wiped more than $130bn off the value of the S&P 500. Research into the economic crisis the same year meanwhile suggested that financial markets are more influenced by negative press rumours than fundamentals.

Fake tweets, real impact Stylus Data

The new meeting place

Social media has become a popular open forum for analysing economics/finance and, equally important, it reflects public sentiment minute by minute. It has long since become essential for economic commentators, policymakers and their faithful followers. Leading economist Paul Krugman runs a Twitter account with approximately 1.5m followers, for instance. IMF chief Christine Lagarde has around 320,000 followers. Also updating in real time are dedicated websites by the likes of The Wall Street Journal and Financial Times, discussing the hot economic topics in great detail. Not surprisingly, people pay attention.

Google power! Cherezoff

Academics have found plenty of evidence that social-media topics of conversation predict what will happen in markets. This is especially true in periods of negative economic news when traditional models that use only financial variables might prove inadequate. For instance, recent research found evidence that online search activity predicts price movements in the US stock markets - and even in the less liquid residential property market. Both these papers argued that the greater the search intensity as buyers appraise the available information, the greater the effect on prices.

I co-authored a recent paper that showed that during the recent eurozone crisis, social-media discussion and Google searches related to "Grexit" affected the spread in borrowing costs between Germany and peripheral eurozone countries Greece, Ireland, Italy, Portugal and Spain. This was over and above the effects of the latest economic data.

When the economic news is bad, social-media power grows Imilian

We also found that Google and Facebook search queries on "Grexit" had less market impact than the "#Grexit" keyword on Twitter. This is not surprising. People are much more likely to click on links on Twitter than Facebook. Facebook users get the majority (70%) of news links from family and friends, and only a tiny share (13%) from news organisations or journalists. Contrast Twitter, where 36% of news links are from family/friends and 27% from news organizations/journalists. This broader mix of sources means that Twitter provides a greater range of information. Facebook users also track with the general population very closely whereas Twitter users are more educated.

It is not a stretch to say that the information that appears and is shared on social media plays a vital role in strengthening the efficiency of financial markets - unless of course people abuse it by posting disinformation. The case of James Alan Craig, whether guilty or not, demonstrates Twitter's power to move markets for ill gain as much as it can predict what they will do next.

The ConversationCostas Milas, Professor of Finance, University of Liverpool

This article was originally published on The Conversation. Read the original article.

>>>>> Scroll down to view and make comments <<<<<<

Click here for Historical News Post Listing










Make a Comment

Econintersect wants your comments, data and opinion on the articles posted.  As the internet is a "war zone" of trolls, hackers and spammers - Econintersect must balance its defences against ease of commenting.  We have joined with Livefyre to manage our comment streams.

To comment, using Livefyre just click the "Sign In" button at the top-left corner of the comment box below. You can create a commenting account using your favorite social network such as Twitter, Facebook, Google+, LinkedIn or Open ID - or open a Livefyre account using your email address.



You can also comment using Facebook directly using he comment block below.





Econintersect Contributors


search_box

Print this page or create a PDF file of this page
Print Friendly and PDF


The growing use of ad blocking software is creating a shortfall in covering our fixed expenses. Please consider a donation to Econintersect to allow continuing output of quality and balanced financial and economic news and analysis.


Take a look at what is going on inside of Econintersect.com
Main Home
Analysis Blog
Are You Feeling the Economic Surge?
Big Mess in Italy
News Blog
How Much Money It Costs To Make Money
Multiple Jobs Needed To Make Ends Meet
The Final Crisis Chronicle: The Panic Of 1907 And The Birth Of The Fed
Is There A Gender Wage Growth Gap?
Moving Averages Can Identify A Trade
Infographic Of The Day: Hobbies That Will Make You Money
Earnings And Economic Reports: Week Starting 05 December 2016
Early Headlines: Green Pty Cancels - Then Appeals PA Recount, IRS Serves Summons On Bitcoin Co, Most Mfg Jobs Lost To Automation, 2017 US Hosing Outlook And More
The Smartphone Market Is Not A Two-Horse Race
Italy's Referendum: What's At Stake And What You Need To Know
There Were Over A Million Casualties At The Somme
The Best Countries In The World
What We Read Today 03 December 2016 - Public Edition
Investing Blog
How To Invest When The Fed Destroys Capitalism
Technical Thoughts: Manage Risk
Opinion Blog
Why Did Trump Win? A Different Perspective, Part 3
Jobs Without Disruptions Through Concordian Economics
Precious Metals Blog
Silver Prices Rebounded Today: Where They Are Headed
Live Markets
02Dec2016 Market Close: WTI Crude Climbed Back Up To Previous 51 Handle, US Dollar Index Trading At The100 Level, Oil Rig Count At 10-Month High
Amazon Books & More






.... and keep up with economic news using our dynamic economic newspapers with the largest international coverage on the internet
Asia / Pacific
Europe
Middle East / Africa
Americas
USA Government



Crowdfunding ....






























 navigate econintersect.com

Blogs

Analysis Blog
News Blog
Investing Blog
Opinion Blog
Precious Metals Blog
Markets Blog
Video of the Day
Weather

Newspapers

Asia / Pacific
Europe
Middle East / Africa
Americas
USA Government
     

RSS Feeds / Social Media

Combined Econintersect Feed
Google+
Facebook
Twitter
Digg

Free Newsletter

Marketplace - Books & More

Economic Forecast

Content Contribution

Contact

About

  Top Economics Site

Investing.com Contributor TalkMarkets Contributor Finance Blogs Free PageRank Checker Active Search Results Google+

This Web Page by Steven Hansen ---- Copyright 2010 - 2016 Econintersect LLC - all rights reserved