How Much Effect Does the Twitterverse Have on Wall Street?

Social media has penetrated nearly every avenue of the business world. From the release of company news and spreading brand awareness to bridging employee/employer communication and employee recruitment, the applications for social media in the public marketplace are endless. Take notice, investors, because social media long ago penetrated Wall Street as well.

In 2010, Johan Bollen, a computer scientist at Indiana Bloomington, investigated whether the mass emotions and moods expressed by the public on Twitter feeds were connected to the performance of the Dow Jones Industrial Average. Bollen’s research led to the discovery of a pattern in which the Dow rose over a few days of “calm” tweets and sagged after a few days of tweets with “anxious” sentiment. From his algorithms, Bollen predicted the direction of the Dow’s closing price with nearly 88 percent accuracy.

Bollen’s research is three years old. In the grand scheme of things, three years isn’t long, but insurmountable changes within social media and technology have obviously taken place since then. However, in this case, the passage of time by no means voids the findings, but rather, accentuates them.

It is estimated that the Twitterverse has grown to more than 4 million tweets each day, countless numbers of them coming from innovative businesses leveraging the latest social networking trends for their benefit. People tend to think in masses, lining up with like-minded individuals to stand behind or against a cause and/or company in any industry offering any service. It’s important for companies to be transparent, truthful, and consistent with their followers, because with the power of a single tweet or Facebook post, a small bit of bad PR can go a long way in a matter of seconds. Anyone paying the slightest bit of attention to the use of social media in the market has seen how 140 characters can affect a stock’s movement.

Public companies have an obligation to themselves to keep a handle on their social media use (Twitter is only one of many). The masses are talking and their message has an effect on how a company is perceived by an audience it often doesn’t even know it has. It is for this reason that companies like SocialMediaRelations.us exist. A professional social media campaign manager not only maximizes the reach and effectiveness of a company’s outreach, but can also advise and execute damage control in the event of bad publicity on the Web.

Whether Bollen’s algorithm carries a legitimate, significant weight can only be proven or squelched by additional research, though it’s an intriguing find, nonetheless. On a smaller scale than the actual Dow, Wall Street and its players are unarguably affected by social media, and it’s up to each company to use social media to its advantage.

For more information on social media relations, visit www.socialmediarelations.us

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