New Paper: "When Can Social Media Lead Financial Markets?"

I'm please to say that a paper (bearing the title of this blog post) by a student of mine, Ilya Zheludev, along with myself and my UCL colleague Tomaso Aste, has now been published by Scientific Reports.  The paper is now available on the web.  The work has already got some press, garnering mentions in The Financial Times, The New York Times, and The Wall Street Journal (click through on each to get to see the articles at each).The paper concerns Ilya's PhD work, which looks at whether there is information in Twitter feeds about stocks that lead the price changes of those stocks. The results consider both the volume of the tweets as a signal, and measures of their sentiment. Turns out, there is information there, but mostly for "cool" brands that match the twitter demographic.The work doesn't use a trading strategy as its evaluation function, which is a strength, since the approach is not dependent on estimates of trading costs and conditions that are likely to be questionable. Instead, it uses a novel information theoretic approach, just considering whether there is leading information there at all.