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Social media sentiment can predict fluctuations in stock market volume as much as six to seven days ahead of time, according to a Harvard Business School doctoral candidate who has been studying the impact social media has on equities.
That could become a valuable tool for hedge funds and investment firms. High volatility often makes it easier for firms to trade stocks. Volatility predictions can also be factored into more comprehensive trading models and better predict whether a stock's price will rise or fall.
Monday has been a busy day for day traders and arbitrageurs interested in Yahoo. 4 hours into trading, Yahoo’s stock is down about 14%, much less than the wisdom of the crowd predicted. The day is not over, maybe a big drop will occur at the end of the day. After that the stock will be back with investors rather than traders. But is it worth investing in?
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