Pinto Souza, Tharsis Tuani;
(2019)
The Impact of Social Mood on Stock Markets.
Doctoral thesis (Ph.D), UCL (University College London).
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Abstract
Assuming social media as a proxy for human activity, behavior and opinion, we aim to test the extent to which financial dynamics can be explained by collective opinion extracted from social media. First, we present an analysis of Twitter sentiment extracted from U.S.-listed retail brands. We investigate whether there is a significan causal link between Twitter sentiment, and stock returns and volatility. The results suggest that social media is indeed a valuable source in the analysis of financial dynamics, sometimes carrying more prior information than mainstream news such as the Wall Street Journal and Dow Jones Newswires. Second, we provide empirical evidence that suggests social media and stock markets have a nonlinear causal relationship. By using information-theoretic measures to cope with possible nonlinear causal effects, we point out large differences in the results with respect to linear coupling. Our findings suggest that the significant causal relationship between social media and stock returns is purely nonlinear in most cases. Furthermore, social media dominates directional coupling with the stock market, an effect that is not observable within linear modeling. Finally, we propose a model that predicts future correlation structure, based on a mechanism of link formation by triadic closure, that combines information from social media and financial data in a multiplex structure. The results demonstrate that the proposed model can achieve up to 40% out-of-sample performance improvement, compared to a benchmark model that assumes that correlation structure is time invariant. Social media information leads to improved models for all settings tested, particularly in the long-term prediction of a financial market structure. Our findings indicate that social media sentiment dominates directional coupling with the stock market in the prediction of individual asset dynamics as well as the overall market structure.
| Type: | Thesis (Doctoral) |
|---|---|
| Qualification: | Ph.D |
| Title: | The Impact of Social Mood on Stock Markets |
| Event: | UCL (University College London) |
| Open access status: | An open access version is available from UCL Discovery |
| Language: | English |
| Additional information: | Copyright © The Author 2019. Original content in this thesis is licensed under the terms of the Creative Commons Attribution 4.0 International (CC BY 4.0) Licence (https://creativecommons.org/licenses/by/4.0/). Any third-party copyright material present remains the property of its respective owner(s) and is licensed under its existing terms. |
| UCL classification: | UCL UCL > Provost and Vice Provost Offices UCL > Provost and Vice Provost Offices > UCL BEAMS UCL > Provost and Vice Provost Offices > UCL BEAMS > Faculty of Engineering Science UCL > Provost and Vice Provost Offices > UCL BEAMS > Faculty of Engineering Science > Dept of Computer Science |
| URI: | https://discovery.ucl.ac.uk/id/eprint/10078956 |
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