Social media monitoring for financial markets
Using social media sentiment in investment decisions and identifying signs of market manipulation / EU research project FIRST reaches successful conclusion
Attitudes and opinions expressed in social networks, online forums and blogs are referred to every day to support countless investment decisions. Information on sentiment enables early identification and evaluation of events that have an impact on financial markets. However, the difficulty is in collecting the unstructured content from the internet and sorting and analyzing it quickly. Suitable software is needed in order to enable financial market participants to use the data directly to support their decision processes. The development of such solutions was the focus of the EU research project FIRST, which has now been successfully completed after three years of work.
One finding of the FIRST project is to automatically analyze the sentiment of online entries and to summarize them to form an indicator. This source of information increases the probability to correctly anticipate financial market trends. "The vast number of available financial information cannot be captured and processed manually by the actors on the markets. The findings of the FIRST project support the purposeful use of the content from social media for all groups of investors as well as for market surveillance and thereby strengthen investor protection and market efficiency", says Peter Gomber, Chair of e-Finance at Goethe University and vice chairman of the E-Finance Lab.
The use of heuristics created in conjunction with market surveillance experts makes certain instances of manipulation on the internet easier to identify. Manipulation could involve the deliberate posting of false information on social media, for instance in 'pump and dump' schemes. The operators of such schemes attempt to inflate the price of a share by publishing a large amount of very positive information and then sell their holdings at a profit before the deception comes to light. "Our research results show that such practices of manipulation affect capital markets. Within the project, promising approaches have been developed in order to identify suspicious messages and thereafter warn of potential manipulation", comments Michael Siering, who has substantially carried forward the development of these models for the Chair of e-Finance.
The FIRST research project was launched in October 2010 and was successfully concluded in November 2013. The aim of the project was to create a new type of information system that uses artificial intelligence to support financial decision-making. The information system uses hidden expertise from social networks and other internet sources to support decision-makers in financial matters. The research project, which was sponsored by the European Union, was conducted by Goethe University Frankfurt, along with eight other companies and research institutes from Germany, Italy, Slovenia and Spain. EU grants totaling EUR 3 million were provided for the project.
Further information on the project can be found at FIRST's website: project-first.eu