What apps do investors need? - #Hubspot

We have been talking to a number of partner, clients and friends of ProActive about application that investors are looking for in the future. One possibility is to build applications on the Hubspot platform, and here is an update on their base product.

What stock applications would you like to see at ProActive?

Canada gets "it" too, social media impacts stock prices

The basis of ProActive's PRISM technology and philosophy was confirmed in a paper by Professor Eugene Soltes of the University of Chicago Booth School of Business. Published in 2009, Soltes’ paper News Dissemination and the Impact of the Business Press states:

“How information is distributed, even when public, is important. Ultimately, I find that the press has a significant effect on bid-ask spread, share turnover, and idiosyncratic volatility. Specifically, greater dissemination of firm news is found to lower bid-ask spreads, increase trading volume, and lower idiosyncratic volatility.”

In a separate study, Professor Terrance Odean of the University of California, Berkeley and Professor Brad Barber of University of California, Davis stated in their paper All that Glitters: The Effect of Attention and News on the Buying Behavior of Individual Investors:

“Consistent with our predictions, we find that individual investors display attention-driven buying behavior. They are net buyers on high volume days, following both extremely negative and extremely positive one-day returns, and when stocks are in the news. Attention-driven buying is similar for large capitalization stocks and for small stocks.”

This week Dominic Jones of IR Web Report reported a story about data that has come out of Canada in reference to social media's impact on stock prices in Canada. He states:

"The survey, released at this week’s Canadian Investor Relations Institute (CIRI) annual conference, was conducted by PR wire service CNW Group and market research firm Leger Marketing. It polled 99 investor relations professionals, of which 56 (57%) said they use social media for business. Of the 56 IR professionals who use social media for business,  49 were Canadian and 7 were from the US.

In the survey, 71% of the IROs who use social media for business agreed with the statement that social media activities and discussions influence investment decisions while 7% disagreed. Asked for their views on a statement that social media activities influence share prices, 64% agreed and 13% disagreed."

The study also covers the question of budgets and are they being allocated specifically for social media:

Full Story @ IR Web Report

Why we like StockTwits as a platform and a company...

Wall Street's Bet on Digital and Social Media Data

Andrew Graham of Greentarget wrote a very interesting article this week "Why Wall Street Is Betting Big on Your Social Media Data"

First he points out how capital is now being raided around Twitter:

Many on Wall Street think they can use social media networks to reliably predict how the markets for their investments will trend. One London-based investment manager says it will launch a fund dedicated entirely to using Twitter for investment decisions. The fund, managed by Derwent Capital Markets, has colloquially become known as “the Twitter hedge fund” among some Wall Street insiders. Although the launch has been perpetually delayed, it has an estimated $100 million in capital.

Next he points out the three reasons for this sudden interest:

1. Today, computers make most trading decisions. Some estimate that between 46 and 73% of equity trading volumes in the U.S. are made by these high-frequency systems, which are designed to use computer speed and processing power to crunch massive amounts of data and seek small profits on enormous trading volume. A system that can reliably make a few cents per trade on hundreds of thousands of trades per day is quite valuable to a firm.
2. Social networks have unique qualities that make them particularly well-suited for the machines that now dominate Wall Street. The sheer amount of content produced on social networks is enormous and continues to grow. The content production itself is a voluntary act. Even the ways with which social networks interact with one another –- the so-called semantic web -– make content production across multiple networks extremely quick. And of course most social media content is public at some level, especially when a carefully programmed algorithm is doing the searching.
3. Other competitive advantages are going away. This growing enthusiasm for social content isn’t so much borne from newness as it is from necessity. As the BBC recently reported, the speed at which high-frequency trading can function is approaching its physical limitation. Speed is a competitive advantage for these platforms but it’s quickly becoming ubiquitous. If and when speed –- called “low-latency connectivity” -– is further commoditized, firms will require a new way to get a leg up on the competition.

Of course there are issues yet to be determined:

Rowady is referring to the difficulty of measuring negative sentiment on a social network, a familiar barrier for many other industries grappling with social media analytics. Users don’t frequently un-like something on Facebook, and using Twitter to complain about negative consumer experiences is dependent on that user’s personality, not the platform’s architecture.

Where are these blind spots, and how should high-frequency trading platforms treat them? How do algorithms find patterns in language used across the social media sphere while at the same time controlling for false-positives? Those are a few of the questions that are keeping Wall Street from mastering the use of social media to inform high-frequency trading strategies.

The Future: 

Perhaps the biggest potential lies with social media’s ability to reinforce or refute certain signals that ultimately lead to trading decisions. It’s akin to a friend giving the final arm-twist that drives you to order ice cream for dessert, or a helpful mentor saying you probably shouldn’t make that one decision. Social media wouldn’t be an adequate determinant by itself. But paired with all the other available information, it could nudge a set of observations into an actual decision.

He misses a couple of key issues such as vertical derivatines of Twitter such as Stock Twits, and he also ignores the evolution of Social Media from Traditional Media. The concept that Social Media is new and that this data is new is simply incorrect. The Berkely and Chicago studies were done a number of years ago.

StockTwits - establishing a leadership position in financial social media

The innovation taking place and ingenuity being exhibited in social media continues to accelerate at warp speed. In the financial world, we continue to see the coalescence and overlapping of investor relations and public relations roles.  This is because the audiences that comprise a company’s investor community and relevant corporate community are no longer mutually exclusive. To this end, public companies are leveraging social mediums to reach both their investor and customer audiences. 

At ProActive we have created a powerful digital platform (PRISM) to heighten our company clients’ visibility and increase their transparency in their quest to better connect with these very audiences.  Sourcing third party content and establishing relevance to our client companies is a large part of what we do.  It’s all about relevance. In the eyes of these audiences, third party content tied into a company’s product and/or service is more effective in validating the product and or service of these companies. Once the content is created, getting it seen by investors is where the real value is added.

One of the content distribution sites we work closely with is StockTwits which is the largest social network for the investor community (70,000 members and counting). The site, and its parabolic popularity growth amongst investors, is a tremendous asset it furthering our client companies’ awareness goals. Investor Relations organizations like ours, have the ability to post information on their client companies and create a thread.  Messages that are posted by the respective IR firm are denoted as such with a green “IR” tab. 

Similar to ProActive's Twitter account, comments from investors on StockTwits are short, sweet and to the point. A major distinctive benefit to posting a message on StockTwits as opposed to Twitter is the "distribution reach."  All messages sent through Twitter are automatically posted on StockTwits, BUT the distribution ends there. However, messages posted on StockTwits make their way to:

• CNNMoney.com,
• Yahoo! Finance,
• Bloomberg,
• Bing, as well as
• Twitter, Facebook and Linkedin. 

Also, StockTwits is specific to investors. Twitter, in contrast, is not.  Financial messaging is co-mingled with consumer messaging.  The site boasts having a solid mix of professional traders, long-term investors and hedge fund managers.  As such, the StockTwits site has significant appeal for companies looking to have their message heard.  

Howard LindzonI recently had the opportunity to chat with StockTwits CEO, Howard Lindzon (see his Blog which ranges from Biotech to Bat Mitzvah!). It is clear that he has an ambitious vision for the site. He states:

“On our site, investors and traders alike have the ability to have their comments amplified to the most heavily trafficked financial websites.  StockTwits is one of the most powerful centralized social distribution channels in existence for companies listed on NASDAQ, NYSE or AMEX. We have major plans in the pipeline to grow our relevance and our value proposition.”

Consistent with this financial social media trend, I am fascinated by recent news of a new hedge fund being formed. A UK-based hedge fund whose entire investment style is predicated on Twitter sentiment was set to launch on April 1^st. As reported here earlier this week, the fund was originally set to kickoff with $40 million in assets. Indications of interests have ballooned to around $100 million and have thus caused the fund’s launch to be delayed.  

Popularized by a strategy study conducted last year, the Derwent fund intends on utilizing sentiment signals from Twitter messages to predict short-term deltas in broader-based market indices.  In the study, it was documented that sentiment change among Twitter users presage movement in the Dow Jones Index up to 6 days in advance with 87% accuracy. http://newsinfo.iu.edu/news/page/normal/16074.html

With this in mind, I am confident that more and more new and existing hedge funds will find creative ways to further leverage the information and data generated on StockTwits. 

All in all, social media is becoming more relevant and important for IR efforts. StockTwits is the most powerful entry point to social media for IR due to its’ growing targeted audience and its’ tremendous distribution and reach.  And we will see more professional traders using social media to find opportunities.  If your IR plan does not include StockTwits yet, it is never too late to get started.

Can Twitter Help You Predict the Stock Market?

Very interesting article about the new look at Twitter as a predictive tool of the stock market on GIGAOM:

"Stock traders are constantly looking for ways to figure out what the markets are going to do so they can get an edge on everyone else — some even track seemingly unrelated factors like the weather to see which way the wind is blowing when it comes to the stock market. So it’s probably no surprise that now traders are trying to track the giant global conversation known as Twitter in order to figure out which stocks are becoming popular. But is there any evidence that this actually works? A German PhD student says that his analysis shows it can, and he has set up a website called TweetTrader.net to put his theories to the test."

See full article @ GIGAOM.

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