Are you one of those investors who turns to the news well before having breakfast in the morning wondering what’s trending in the world of financial markets? Do you ask yourself if you’ll follow the investing crowd today or does it make more sense to go against them?
Wouldn’t it be great to start the morning off by understanding the collective mood of global investors and then, at your leisure, decide what to do with that collective wisdom, and where to invest, well before the market acts? Stock crowd’s leanings and state of mind have long been a helpful tool for the trader, but how then can we look deeper into that sentiment?
Behavioural Finance seeks to explain behavioural/cognitive reasons for irrational decisions, but it has been poor at dealing with stock market bubbles and identifying when they will inflate or deflate. As humans, the decisions we make are largely driven by emotions rather than behaviour and reasoning – an emotional process driven mainly by our unconscious mind. So, imagine if investment firms were able to harness the power of insight into the underlying emotional content and processes at work of individuals and use those as early indicators of market impact.
Using methodologies, algorithms and statistical models to understand the underlying emotional content, processes and capturing the mood of ‘the crowd’ could deliver some very powerful advantages for investment firms.
Today, sentiment analysis is evolving at an accelerated pace. By capturing the mood of individuals and markets, sentiment analysis can provide real insight into upcoming events and provide early market indicators, helping traders gain an edge in their portfolios before events impact the markets.
The outputs of these processes can then be used within statistical models that identify the significance of this emotional content and compare this to historical activity in order to create inferences on current performance and predictive modelling.
Through text mining of structured and unstructured sources of information, firms get a deeper understanding of motivations for irrational behaviour and provides a window into market opportunities.
Using the most advanced algorithms developed from over 10 years of academic research and connecting to any data source securely, ALA OneLogic identifies and catches signs of bubbles, market trends, overconfidence in M&A deals, and other useful indicators, in any language, and across jurisdictions. If you’re curious, learn more about market sentiment and emotional finance and get in touch at: firstname.lastname@example.org