Can social media predict the stock market? - Jonathan Lea Network

Can social media predict the stock market?

A recent Money Week article studies whether web based data from search engines and social media can be used to predict future behaviour.  Similarly, other academic researchers have discovered that mentions of political candidates on Twitter are good predictors of electoral outcomes.  


The article refers to a paper entitled Twitter Mood Predicts the Stock Market published last year whereby three computer scientists researched whether societies experience collective mood states that affect the nation’s decision making and whether these correlate and can predict economic indicators.  By measuring the ever growing stream of words that emanate from the Twitterverse, the study found that rises and falls in instances of certain words indicative of mood  correlate with rises and falls in the stockmarket between two and six days later which seems to confirm the long held belief that stock prices are  influenced by the general public feeling.  

As a result of this study and working with its authors, London based hedge fund Derwent Capital Markets has based an entire fund (the Twitter Fund) on using social media analytics to guide their thinking.  The fund, the first of its kind, was launched in May 2011 and bases its decisions principally on “sentiment derived from real-time social media data analysis” in an attempt to use technology and data to be able to quantify human emotion.  So far the fund has recorded positive returns for investors and outperformed the wider hedge fund industry.  Paul Hawtin, Derwent’s founder and fund manager, noted that when sentiment dropped, and people tweeted about feeling tight on money, were worried or anxious, the markets would crash two or three days later.


There are a growing number of other studies looking at social media as a lead indicator of share price performance which indicates that brands will allocate more and more resources to ensure that there is a positive online buzz surrounding their name in order to improve their stock performance as traders start to follow the online metrics ever more closely.

About Jonathan Lea

Jonathan is a specialist business law solicitor who has been practising for over 18 years, starting at the top international City firms before then spending some time at a couple of smaller practices. In 2013 he started working on a self-employed basis as a consultant solicitor, while in 2019 The Jonathan Lea Network became a SRA regulated law firm itself after Jonathan got tired of spending all day referring clients and work to other law firms.

The Jonathan Lea Network is now a full service firm of solicitors that employs senior and junior solicitors, trainee solicitors, paralegals and administration staff who all work from a modern open plan office in Haywards Heath. This close-knit retained team is enhanced by a trusted network of specialist consultant solicitors who work remotely and, where relevant, combine seamlessly with the central team.

If you'd like a competitive quote for any legal work please first send an email to with an introduction and an overview of the issues you’d like our help with, following which someone will liaise to fix a mutually convenient time for a no cost no obligation initial 20 minute call with one of our fee earners.

We are always keen to take on new work and ensure that clients will not only come back to us again, but also recommend us to others too.

Get In Touch

Contact Us

In need of legal advice? We would love to hear from you!