Everyday hundreds of millions of posts are made about the market across various social media platform. Earnings rumors, viral memes and influencers can trigger sudden price swings, and ignoring this information suggests a lack of due diligence which can lead to costly losses or missing out on alpha.
We’ve put together a list of the top 8 reasons why we believe all investors need to incorporate social media into their investment strategies.
News often breaks first on social media. While traditional news goes through an editorial process of writing a piece, witnesses of an event can just take out their phone and post in seconds. In the world of finance, those minutes could be the difference of millions of dollars.
In 2013 , the SEC approved companies to make potentially market-moving announcements and disclosures on social media like X/ Twitter.
Many professional, institutional, and even retail investors post legitimate opinions and research on social media. Retail traders and sometimes even institutions will tail investment advice from online. This had been around since before social media as investors, like Michael Burry, got their start in finance by writing investment blogs.
Your typical Influencers from politicians to executives like Trump and Elon have been known to influence stock prices with single tweets. We’ve also seen celebrities move stock prices like when Kylie Jenner tweeted about Snapchat.
This may be the most popular reason our customers come to us because sudden, illogical, and extreme price shifts from meme-stock trades have led tens of billions in losses in the market in the last 5 years. Along the way meme stocks have shut down multiple firms, likely because social media was not incorporate into their models. Just last week we saw 5 new meme stocks spike over 10% each. Avoiding being on the wrong side of a short-squeeze needs to be a priority if your firm has short Interest.
If a product has a bug, a brand faces public scrutiny, or people just begin to dislike a brand, users on social media will be the first to let you know. Social media is the first place where customers go to discuss the things like McDonald’s bringing back the snack wrap, captured by our AI Summaries below.
7. Source Diversification
Diversification in your data is just as important as portfolio diversification. Social media combined with fundamentals, technical and macro-data offers more inclusive risk management, better entry and exit
8. Overall Predictive Power
Our social media data has outperformed the market. On a weekly basis we update backtests on the performance of our data. Without curve-fitting , our signals continue to excel.
Context Analytics has been quantifying social media conversations for over a decade. We aggregate relevant and reliable information to provide a clear and actionable signal. We help financial institutions mitigate the risk of social media on their portfolio and capture alpha. If this is something you are interested in exploring email us at ContactUs@ContextAnaltyics-AI.com