All of us know that Hollywood movie directors keep their ear to the tweet ground to understand the ‘pulse’ of the audience even before the movie releases. But research at Indiana University, US has proved that analyzing and keeping an ear to tweets can help you in predicting stock market fluctuations. The researches measured the ‘collective mood’ of the tweeters by analyzing 9.8 million “tweets” from 2.7 million users of the micro-blogging service during 10 months in 2008. Researchers could predict with 90 % accuracy the rise and fall of the Dow Jones Industrial Average and with 87.6% accuracy the he daily up and down changes in the closing values of the Dow Jones Industrial Average. They analyzed the positive and negative feel of the tweets and also analyzed the mood of the tweets such as calm, alert, sure, vital, kind, and happy. The researchers then compared the sentiment to Dow Jones. The research proved that tweets could predict the result of the stock average as early as 2 to 6 days.
Social media can next be used by stock and mutual fund companies too for appropriate management of portfolios.