Twitter Can Predict the Dow Jones Industrial Average Futures

I was at lunch the other day and saw a segment on CNBC that discussed a study that came out in October 2010 about how a scientist measured the Dow Jones Industrial Average comparied to Twitter. His findings were that based on the sentiment of the Twitter comments (positive comments vs. negative comments) he could accurately predict which way the Dow would move up to 3 days in advance.

The reason why it made the news within the last few weeks was that there is now a stock fund being formed based on this trading theory.

I believe this was the first time I have seen a social media tool in the news being used in this way. What I think this means is that social media will be used as a predictor for many other things. For instance, will worldwide sentiment be able to predict the prices of oil or other commodities such as orange juice? Over the Christmas holiday all I was reading about was how merchants were trying to predict their holiday sales and how that would impact the overall economy. Now forecasters don’t have to wait, they can just measure Twitter sentiment.