Analyzing Sentiment in Stock Prediction

22

October

2017

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Over the last decade, Information Technology (IT) has improved dramatically. This caused change in almost every profession in every industry. In this blog post, I would like to go more in-depth into the changes IT caused in stock prediction, and then particularly about the influence sentiment analysis has and how IT has enabled this technique to be more accurate. Sentimental analysis can make use of various techniques to analyze the people’s thoughts and opinions and relate this to the stock price movement.  Examples of these techniques include (but are not limited to): text mining, natural language processing and artificial intelligence and then in more particular machine learning (Hughes, 2017). Obtaining relevant data for this analysis has become easier. This is because of the rise in popularity of Social Media platforms. A new method emerged to analyze the connection between the public emotion and the stock trend by analyzing the data on these networks. In this blog post, one particular social media platform is chosen, namely ‘Twitter’.

Sentimental analysis is important in the field of behavioral finance. It is believed that the only factor that matters is the human emotion, being the sole driver of the stock price (Blog.twitter.com, 2017). By using one of the above mentioned techniques, the words that make up sentences can be translated into data that is understandable by computers. Each word is given a sentimental value between the two spectrums positive and negative. Advanced techniques are needed to increase the chance of correctly understanding phrases: combinations of different words.

Twitter is a growing social media platform and often used in a sentimental analysis. The reason for this is because there is a vast amount of real-time market conversation on a daily basis (Blog.twitter.com, 2017). To the question: “Is there really any correlation between Twitter and the stock market price?” there is the following answer (example): In 2013, the Associated Press’ Twitter account was hacked and posted the fake statement that Barack Obama had been injured in an explosion at the White House (Matthews, 2017). According to the Financial Times, this single tweet caused a shock in the stock market. The S&P 500 declined with one percent equaling $130 billion in stock value in just a matter of seconds. So to come back to the previous question whether there is a correlation between Twitter and the stock market price: definitely yes.

So for the investors and traders among us, the question is of course: “Is it wise to rely on sentimental analysis that is based on just Twitter data? “. Out of personal opinion, I am convinced that sentimental analysis based on twitter output is reasonably indicative for predicting the stock price. Of course, this also strongly depends on the technique and model that is used for the sentimental analysis. However, by incorporating multiple techniques to eventually come to your conclusion is more likely to be correct.

 

Hughes, L. (2017). Machine Learning With Heart: How Sentiment Analysis Can Help Your Customers. [online] Digitalist Magazine. Available at: https://www.digitalistmag.com/customer-experience/2017/10/18/machine-learning-sentiment-analysis-can-help-customers-05429002 [Accessed 22 Oct. 2017].

Blog.twitter.com. (2017). Twitter Data and the Financial Markets. [online] Available at: https://blog.twitter.com/official/en_us/topics/insights/2016/twitter-data-and-the-financial-markets.html [Accessed 22 Oct. 2017].

Matthews, C. (2017). How Does One Fake Tweet Cause a Stock Market Crash? | TIME.com. [online] TIME.com. Available at: http://business.time.com/2013/04/24/how-does-one-fake-tweet-cause-a-stock-market-crash/ [Accessed 22 Oct. 2017].

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Technology & Millennials: Love-hate relationship

4

October

2017

5/5 (11)

Waking up, what is the first thing you do? You grab your phone, check your messages, view your mailbox and then open your social media apps and spend a lot of time browsing through content. Why do we commit so much time to this morning routine? It is not so much that we read important information, but it is more about the feeling of not wanting to miss anything that has happened since yesterday. Most people see technology as a tool, something that humans can use to reach certain goals. But when technology is highly involved in our life, we tend to let technology control us. We become overly dependent on technology.

According to a study conducted by Flurry, the average hours spent per day on a mobile device is 5 hours while millennials now spend up to even 9 hours a day on social media platforms. A day comes with 24 hours, subtracting the average sleeping time of 8 hours gives us 16 hours. The average time spent on your mobile device equals 31,25% of the time you have available each day. According to a news article from The Telegraph in 2011, a student ‘addiction’ to technology is ‘similar to drug cravings’. They found that four in five students had significant mental and physical distress, panic, confusion and extreme isolation when forced to unplug from technology for an entire day. They call it “information withdrawal syndrome”.

Another report from the American Psychological Association (APA) stated that being constantly connected increased stress. Immediately checking and responding to your emails is bad for your health. This urge to immediately reply to your boss, co-workers or clients is named “workplace telepressure.” Removing the barrier between your work and private life disrupts the balance. Work follows you even after you are done. A fixation on work email can contribute to physical and mental burnout.

Moreover, 45% of the parents feel disconnected from their children because of technology, according to APA report. Not only parents can feel this way, also friends. Often when millennials are physically in the same space as their friends having a meetup, they are distracted from reality by being constantly on their phone. They are talking to other friends while neglecting their friends right in front of them. Why? Because everyone else is also doing it. It has become the norm.

Group of student at teen age, using smartphone in concept of smart phone addiction. Flat design.

The number of meaningful relationships a millennial has is scarce. The majority of millennials are active on social media. According to the Pew Research Center, an average Facebook user now has 338 friends. This number is, of course, a lot higher for millennials. Having so many (digital) friends, keeping contact with lots of people at the same time, and negligence of friends mentioned in the paragraph above, makes you feel easily replaceable. You feel having a lack of personal attention.

Last but not least, millennials are raised with the message that they can do anything they want. They are the generation that will change the world. So we grow up with the thought to really have an impact on this world. Articles popping up daily about another successful young entrepreneur. However, the reality is far different for the most of us, where success is not reached instantly.  Now add social media, where everyone portraits themselves as the best version of themselves, often unrealistic. Millennials spend so much time browsing through all the content on social media and watching how perfect and impactful other people’s lives are, that they become insecure when they compare it to their own life. Because they are comparing a perfect illusion with reality.

“Millennials will be the smartest, most developed and successful generation the world has seen so far”. This is the general thought of the rest of the population when they think of people born between the early 1980s and the early 2000s. Because of the rapid development of technology during this period, millennials are (expected to be) familiar with using technology. Which is true for the most part, in my opinion. Technology has been intertwined with our lives from the day we were born. Millennial’s technical competence, the rise of technology and high welfare during their upbringing are the main reasons for why the expectation for this generation is so high.

We, as millennials, love technology, we cannot live without it. Too much, and it becomes an addiction. You hate that you love your social media addiction, but there is not much you can do. By removing your connectivity to the rest of the world, you feel anxious, alone and untethered. We are the first generation that grew up in this technology-focused environment. Whatever problem we encounter, we will also solve it for the generations to come. So, my final message is: keep on using technology but stay aware of how it affects your life.

 

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