Interest in internet forecasting was sparked by a paper published in 2009 by Hal Varian, Google’s chief economist. He found that the peaks and troughs in the volume of Google searches for certain products, such as cars and holidays, preceded fluctuations in sales of those products. Other researchers have shown that searches for job-related terms are a good predictor of unemployment rates and that mentions of political candidates on Twitter correlate with electoral outcomes.
Johan Bollen of Indiana University Bloomington (and his team) examined all the data for the autumn and winter of 2008, they found that Twitter users’ collective mood swings coincided with national events. Happiness shot up around Thanksgiving, for example.
Dr Bollen’s algorithm, which he described in a paper published in February in the Journal of Computational Science, has been licensed to Derwent Capital Markets, a hedge fund based in London. Derwent will use it to help guide the investments made with a £25m ($41m) fund that the firm hopes to launch in the next few months. Other funds are rumoured to be using similar tricks already. WiseWindow, a marketing firm based in Irvine, California, uses social-media activity to forecast demand for products.
Read more at The Economist
