According to the latest research results of the Colt Technology Services, the posts that are made on social networking sites such as Twitter and Facebook have their own effect on the stock prices. With each passing day, more and more investors are starting to monitor the information and hence, such news stories being published are having an increased importance.
The research was based on 360 different UK based financial services and 63% of them agreed that social media sentiment can have great impact on the valuation of the individual shares. However, though the social networking site news has impact on the sentiment, according to the research, only 7% of them make trading decisions depending on the information published on these sites. The results of this research were announced by Hugh Cumberland, the Solution Manager of the Payment and Settlement Services Department of Colt. Social media is considered as a trailing indicator by 45% of the participants and they use the same for validating the trading decisions that they make.
According to Cumberland, these numbers show the immaturity of this area. He added that addressing any sort of anxiety over data integrity needs confidence that it is possible for the tools to accurately separate credible data from the social noise and the maliciously generated content as well.
Last December, a review was done on how the crises affect the listed firms and the formation of the boards. In the same, it was mentioned that how corruption, tax, rogue traders and money laundering frauds can trigger some sort of the highest short term losses on the share values of a company. When news of a company doing misconduct surfaces, it can cause declines of as high as 50%, according to the review and these behavioral crises were termed as spooky factors. The December review was published by Freshfields Bruckhaus Deringer LLP, a law firm.
Incidentally, DCM Capital, which used to be known as Derwent Capital Markets, started a hedge fund using social media to identify the sentiment in August, 2011; The Derwent Absolute Return Fund actually got closed down just 3 months after the same. However, on last month, the company started a new spread betting platform known as DCM Dealer. This includes a unique feature of calculating the sentiment for indexes, commodities and individual stocks.