Tweet causes Apple stock price rise

Trading based on social media sentiment has become a trending topic itself – with recent news stories showing both the negative and the positive impact social media can have on a company’s share price.

Last week billionaire investor Carl Icahn caused a rise in Apple’s stock price after sharing his opinion that the stock was undervalued on Twitter, following a conversation with Apple CEO Tim Cook. Last April, we saw that one tweet could wreck the stock market when a malicious message attributed to the Associated Press described an attack on the White House and Barack Obama. Despite the rapid reaction in pulling the tweet, the damage was done within seconds. The Dow Jones fell 143 points.

We published findings from our own study into the effect of social media on share prices in February of this year. Our study focused on how public sentiment, as expressed across Twitter or Facebook, was being analysed by trading companies and factored into their equity and bond valuations. Of the 360 finance professionals questioned about this, 63% believed sentiment was affecting such valuations.

On the basis of the report I pointed out that getting data to the heart of the trading systems as fast as possible is nothing new. Addressing anxiety over data integrity requires confidence that the tools can accurately separate credible data from the general social noise along with maliciously generated content.

It’s difficult to imagine that traders are not already sharing thoughts and opinions in private social networks, but a lot of questions still need answers. Could organisations use ‘semi-private’ information that would have a higher factor of accuracy? Or would that actually limit the insight that the organisation can get from a general market sentiment? Where are the checks and balances to avoid a #crash caused by malicious sources? Firms will need to address these questions if they want to continue to use social media successfully.

At the same time social media networks are in the spotlight to provide better security measures. Bloomberg reported that Twitter recommended a number of security measures to members of the press including plans to introduce two-step authentication. In addition to a password, the security measure usually requires a code to be sent as a text message to a user’s mobile phone, or generated on a device or in software. While this may work for some of the more corporate Twitter accounts used for broadcasting information, it is not going to protect the account of every member of the press.

The separation of valuable information from noise is going to be paramount to organisations that want to use social media to compete in the markets. The large volumes of comment generated by key influences also demonstrate the need for all systems that feed into the trading floor to be underpinned by the appropriate IT infrastructure to ensure a fast and well-managed flow of data. It will, however, be impossible for trading firms to hide their heads in the sand over social media, the competitive benefits are too great to ignore.