Derwent Capital Markets Opens World’s First “Twitter Based” Hedge Fund

Filed as News on May 18, 2011 2:42 am

Twitter Stock Market BirdLondon Investment Firm Derwent Capital Markets is using Twitter to hedge their future bets, quite literally. The company is using their own proprietary systems to examine Tweets before determining where to put investments in their $40.5 million hedge fund.

According to the company they are currently analyzing 10% of the 10 million tweets sent daily. Using specific trading algorithms and sentiment analysis the company then determines where to put their money.

The idea of using Twitter to determine markets isn’t new, StockTwits offers a third party application for market analysis, however Derwent is the first firm to form a full hedge fund for Twitter trading purposes.While the idea may seem extremely radical to traditional traders a paper published by three computer science student at Cornell was able to predict market conditions 87.8% of the time in terms of “daily up and down changes in the closing value of the Dow Jones Industrial Average.”

According to the Financial Times if Twitter isn’t where you want to hedge your future bets a company in Japan is preparing to analyze blog sentiments for the same purpose.

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