A paper published by Indiana University and Manchester University suggests that social media can be used to predict market movement. Specifically Twitter was used to predict movements in the Dow Jones correctly with 87% accuracy.

This idea of mining social media for an edge in the markets has already spread to the wonderful world of hedge funds. Based in London Derwent Capital Markets launched a $40 million fund in February where the chief stategy is to use algorithms to mine Twitter for data that can help the fund predict future movement in the markets.

If the fund proves successful its only a matter of time before other institutional buyers turn to social media analysis to trade the markets. Johan Bollen an associate professor at Indiana University sheds some light on this research.