Whitepaper: Predicting Stock Price Range and Volatility with Pre-Market Twitter Activity

High volatility (wide trading range and large price changes) and high liquidity (high trading volume and narrow bid-ask spreads) are two essential ingredients of good trading opportunities. Unfortunately, these two qualities don’t occur together as often as traders would like. Wide range days of 2-3% or more are infrequent on the most liquid blue chip stocks, which are often the only stocks some of the biggest traders can trade.

intraday-trading-range

There are several ways in which traders can identify stocks most likely to make big moves and prepare a shortlist of stocks to focus on during an upcoming trading session. Some are based on recent market activity (e.g. recent trading range, historical volatility or options market statistics), while others are based on news and fundamentals that are usually more difficult to quantify and back test.

The growing popularity of social networks, such as Twitter, provides an alternative. Twitter’s realtime feeds and historical data is of sufficient volume and breadth that with sufficient processing, is ideal for quantitative analysis. Specifically, FSwire finds, that by analysing selected data from Twitter, in the period prior to the market opening, stocks identified with unusually high message volume will result in a definable increase in both trading range and trading volume. Even accounting for pre-market trading and changes in opening price, FSwire finds a potential trading advantage.

Download the whitepaper: http://goo.gl/XAZujk

Authors:
Petr Houstecky (Petr.Houstecky@fswire.com)
Cynan Rhodes (Cynan.Rhodes@fswire.com)

Twitter vs Thomson Reuters: Delek Holdings Results

Delek Holdings recently announced their results for the first ninth months of 2013 (including those for their listed US unit).

The first tweet that fswire ingested was from @InvestorEnergy at 08:50 UTC which linked to http://www.otcmarkets.com (http://www.otcmarkets.com/stock/DGRLY/news?id=72226) which provided a pdf of the full results.

The news (press release) was originally distributed via PR newswire and did appear on a number of sites (such as Bloomberg & Marketwatch) earlier than 08:50 but we couldn’t see any other tweets.

It is also worth noting the results from our search engine (http://www.ftsea.com/?q=delek). Where the volume of Tweets is not high, the search results include indexing of related sites and can often return better content.

delek-results-fs2

In comparison, Thomson Reuters published the news at 09:38 UTC and while they provided a summary of the results, the full results were not attached or linked to.

delek-results-tr

Twitter vs Thomson Reuters: Nigerian beer

A slightly less serious example, although a important topic, of how news travels from emerging markets – unless of course you are a beer drinker in Nigeria.

The following appeared in fswire at 20:29 UTC on Wednesday evening.

nigerian-beer-fswire

The first example of this in Thomson Reuters was at 19:57 UTC on Thursday evening.

nigerian-beer-reuters

Maybe the time difference could be explained because this isn’t that important to world markets. Possibly, but then again, everything is relative. Cheers.

Update: this story (on yahoo news) just made it (Fri 29th) onto digg.com so it’s officially a big story now.

ftsea.com launched – a new financial search engine

ftsea.com is a specialised search engine for financial services.

The content that is returned has been extracted from those links that people are actively sharing on Twitter. The messages and links that are selected go through an extensive filtering process to eliminate as much poor quality and non-financial content as possible.

The best way to show the value of the search engine is to look at an example.

Here is a search for ‘fracking’. The first image shows a standard search on Google. The results are all relevant to fracking but they are very general in nature.

google-search-fracking
Click to expand

A Google News search returns better results but the articles at the top are typically from higher profile sites that presumably have a higher pagerank score. While there is logic to that, it does mean that it is more difficult to find articles that could lead to any sort of edge. It is relatively easy to find articles from the Guardian or Bloomberg but it is much more difficult to find relevant but niche content that could make a difference. Also note that the top article from the Guardian is already three hours old.

google-news-fracking
Click to expand

Finally, the results from ftsea.com. Significantly more content and more particularly more recent content. Note that all the content showing on this page falls well within the hour.

ftsea-search
Click to expand

Twitter vs Thomson Reuters: Apple buys Primesense

The rumours had been around for a while, but now it was official – Apple Confirmed the acquisition of 3-D Sensor Startup PrimeSense.

On Thomson Reuters (Eikon) we looked for the news in both the Apple feed (AAPL.O) and in mergers and acquisitions. In both cases, the first article was the one highlighted below which appeared at 06:43:14 (London).

Twitter was significantly faster. The earliest message we ingested into our system was from @allthingsd, note the second image which shows the timestamp at 23:22 (London) on Sunday night.

It’s quite a big time difference. If we missed an earlier article on Eikon, please do let us know.

aapl-primesense

fswire-aapl

fswire-aapl2

Eating AAPL pie

Entity extraction or determining what assets a message relates to can be a difficult task.

With the hundreds of millions of tweets a day, it can be difficult to have 100% accuracy and services such as FSwire are often criticised for any messages that have been incorrectly allocated.

We couldn’t therefore help but feel a little smug when this popped up on the AAPL.O feed in Thomson Reuters (Eikon) earlier today.

It’s good to see we all get it wrong occasionally.

cranberries-find-sweet-tart home in a festive curd v2

cranberries-find-sweet-tart home in a festive curd

Breaking news examples from Twitter

Over the coming weeks, we’ll highlight some examples of where using Twitter would have had an advantage over using a traditional, financial news service such as Thomson Reuters or Bloomberg.

We do know from experience that sometimes Twitter is faster and sometimes it is slower. Often it is news from emerging markets which breaks first on Twitter as Bloomberg and Thomson Reuters have less of a footprint.

Here is one example from Friday 22nd – an oil pipeline explosion in China, a clear example of the news appearing first on Twitter.

The first tweet we were aware of was by the Xinhua News Agency in China (see https://twitter.com/XHNews/statuses/403734889331056641)

FSwire picked it up a little later, but still before it appeared on Eikon

Screengrab from fswire:
chinese-oil-explosion-fs

Screengrab from Thomson Reuters (Eikon):
chinese-oil-explosion

If you noted the announcement any earlier, please do let us know.