Commentary on social media websites has reached new heights. As Twitter will celebrate 7 years since its launch, the total number of tweets now exceeds 400 million messages daily. Social media provides rapid news delivery than traditional methods, and contains opinions, commentary pieces, and personal perspectives relating to business activities as well as political events.
Social Media has challenged traditional publications as the future of information dissemination. The information flow is not directly targeted at reporting a news story in the classic sense, but artistic license to portray an emotion, the global psyche from the voices of millions.
Leveraging Twitter or other social media sources for economic and company information to gain actionable insight has begun to accelerate. The idea of trading based on non-traditional information is not new, but using Twitter or other social media sources of economic and business information has piqued beyond mere curiosity. There were a few pioneers who made a bold attempt to filter and trade on social media sentiment, yet only the unsuccessful make the headlines. The market impact following a fake tweet from a malicious hack into the Associated Press (AP) Twitter account bears witness to the increasing influence of social media on financial markets, providing the evidence that it is more than chatter about nothing.
Just how strongly social media impacts the financial markets is still unknown. The unabashed commentary suggests automated trading ran wild following the Hash Crash, causing the 145 point decline in the Dow that same day. Such accusations are wild speculation at best, unfounded by empirical evidence. It is just as likely that the human emotional response to the malicious act notoriously described in the fake Tweet caused the brief market plunge. Yet it is decidedly difficult to know.