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Google Should Start A Hedge Fund
 

Moneyball's picture
ER
 
Points)
 on 6/22/12 at 6:20pm
if-you-cant-afford-a-bloomberg-terminal-then-build-one-yourself.jpg

Apparently following and measuring internet chatter may have predictive abilities in the movement of stocks according to a post by The Daily Stat

Researchers were able to do 7.9% better than the S&P 500 stock index by (virtually) investing in brands that generate high volumes of online chatter. In studying four years' worth of product reviews of 15 brands, Seshadri Tirunillai of the University of Houston and Gerard J. Tellis of USC's Marshall School found that sheer volume of reviews and negative chatter have a strong predictive relationship with stock returns; positive chatter and five-star ratings have no predictive value. The stock-return effects are rapid but not immediate: They follow bursts of user-generated comments by a few days, the researchers say.

Do you think this is a legitimate strategy and would you try it? Perhaps a new arsenal for technical analysts?

Moneyball
See my other WSO blog posts

Comments

goodL1fe's picture

I've already heard of hedge

 
Points)
 on 6/22/12 at 6:41pm

I've already heard of hedge funds using algorithms that track media (blogs, news outlets, etc).

Obviously, Google would be at a huge advantage if say for example they started to say track Goldman Sachs employee inquires. I'm pretty sure the boys in Palo Alto could easily put together a list of potential deals based off of certain inquiries.

Robert Clayton Dean: What is happening?
Brill: I blew up the building.
Robert Clayton Dean: Why?
Brill: Because you made a phone call.

mhurricane's picture

Presently, the firm may not

 
Points)
 on 6/22/12 at 6:42pm

Presently, the firm may not have the expertise. However, they have a VC fund, which I think is a little more fitting.

The difference between successful people and others is largely a habit - a controlled habit of doing every task better, faster and more efficiently.

BlackHat's picture

Problem is this works on

HF
 
Points)
 on 6/22/12 at 6:43pm

Problem is this works on paper but if you look at the stocks that get the chatter it's usually because they're already in the process of making big moves, and there's really no time in real life to build up a position on those stocks, but when you can place an order in a simulation for 2% of the company and have it fill in 1 second it's pretty damn easy to shit on the market.

I hate victims who respect their executioners

Follow BH & Co. on Twitter: @DumbLuckCapital
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trazer985's picture

I thought google was setting

ST
(King Kong, 1,775
 
Points)
 on 6/22/12 at 6:53pm

I thought google was setting up a hf.

In reply to goodL1fe
seabird's picture

goodL1fe: I've already heard

PE
(King Kong, 1,558
 
Points)
 on 6/22/12 at 7:12pm
goodL1fe:

I've already heard of hedge funds using algorithms that track media (blogs, news outlets, etc).

Obviously, Google would be at a huge advantage if say for example they started to say track Goldman Sachs employee inquires. I'm pretty sure the boys in Palo Alto could easily put together a list of potential deals based off of certain inquiries.

You could make macro predictions of future economic cycles and consumer preferences based off of current data. I remember reading about how Bass sent guys to interview germans on their feelings about bailing out the greeks, and using that information to bet that they would have a more limited willingness to help in the future. It seems reasonable to me that you could potentially get a lot more subtle than that and make predictions about expected growth in specific sectors based off of unconscious trends and their logical psychological impacts on societies purchasing habits. Take for instance the increase in impregnation and sexual drives when people think there will be wars involving them in the near future.

“...all truth passes through three stages. First, it is ridiculed. Second, it is violently opposed. Third, it is accepted as being self-evident.”

- Schopenhauer

watersign's picture

Hedgefund are already taking

(Baboon, 135
 
Points)
 on 6/22/12 at 7:47pm

Hedgefund are already taking advantage of 'big data'

:) its cool stuff

alpha currency trader wanna-be

In reply to watersign
Macro Arbitrage's picture

watersign: Hedgefund are

HF
(King Kong, 1,404
 
Points)
 on 6/26/12 at 2:10pm
watersign:

Hedgefund are already taking advantage of 'big data'

:) its cool stuff

most of them suck

"I swear, by my life and my love of it, that I will never live for the sake of another man, nor ask another man to live for mine."

OMS's picture

eeeeeeffffffff

PE
(King Kong, 1,886
 
Points)
 on 6/26/12 at 2:08pm

eeeeeeffffffff

watersign's picture

the problem with big data is

(Baboon, 135
 
Points)
 on 6/26/12 at 6:08pm

the problem with big data is that there is so much of it and finding whats useful in a sea of data..is the hard part

alpha currency trader wanna-be

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