Computers That Trade on the News
Today, The New York Times described how some hedge funds analyze and trade on market sentiment. Their computers sift through masses of news articles and social media posts. Their robo-readers assess investor mood by counting key words or even, you can't make this up, the number of emoticons zinging around the Internet.
Some of these programs hardly seem like rocket science. Working with academics at Columbia University and the University of Notre Dame, Dow Jones compiled a dictionary of about 3,700 words that can signal changes in sentiment. Feel-good words include obvious ones like “ingenuity,” “strength” and “winner.” Feel-bad ones include “litigious,” “colludes” and “risk.”
Once they know how the world "feels," hedge funds can make lightening fast momentum trades. Buying when spirits are good and propelling the markets higher. Or dumping shares when the world is on the verge of an extended funk.
Whatever happened to value investing?
It's easy enough to write code that tweets and "likes" bullish market thoughts and smiling emoticons at some ridiculous rate, say a bazillion every thirty seconds. Right? And who knows what will happen? We saw mortgage markets blow up in the wake of robo-signers.
Robo-readers will create havoc all their own.
I don't know about you, but I want the market to go up. That's why I'm listing happy, bullish, good-mood emoticons, courtesy of Wikipedia:
:-) :) :o) :] :3 :c) :> =] 8) =) :} :^)smiley or happy face,[1][2][3][4] version without colon common in Russia :D C:big smiley
( )hug, commonly called a cyberhug :-D :D 8D xD XD =D =3 <=3 <=8laughing,[1][2] big grin,[3][4]
The next steps are yours. We'll do this together, the old-fashioned way. Who needs robo-algorithms?
Tweet this post. Like it on Facebook.
Send signals to robo-readers that life is good. Once hedge funds start buying stock, we'll make 2011 the best year ever for investors.
The New York Times describes my novels as “money porn,” “a red-hot franchise,” and “glittery thrillers about fiscal malfeasance.” Through fiction I explore the dark side of money and the motivations of those who have it, want more, and will steamroll anybody who gets in their way.