"Blogs move the market," declares Penny Herscher, president and CEO of FirstRain (booth #1414), a provider of analytics and reports that sift through the vast quantities of news, blogs and other information on the Web to provide institutional investors and hedge funds with the items most relevant to their investments. She points to research conducted by Veljko Fotak, a Ph.D. student at the University of Oklahoma, which indicates a direct correlation between blogging and stock movements.
Fotak collected recommendations from blogs and then examined returns and trading volumes on the days surrounding publication. "Blog recommendations do appear to have an impact on stock prices and trading volumes," Fotak wrote in his 2007 report, "The Impact of Blog Recommendations on Security Prices and Trading Volumes."
But the volume of blogs is staggering. Internet search engine Technorati lists more than 103 million active blogs. And about 175,000 new blogs are written every day, according to Herscher — that's 18 new blogs per second. Further, she adds, it's estimated that 145 million people will be reading blogs by 2012.
"Blogs are where many of the most intriguing questions, trends and ideas first come to light," Herscher contends. "Manually finding the meaningful information from the volume of meaningless chatter is just not practical, even for the largest firms. It is becoming imperative for users to have a tool to quickly and effectively stay informed and derive insights from the Web."
To help portfolio managers and analysts rapidly navigate the blogosphere, FirstRain has developed a Blog Impact Report. The report draws on the work of FirstRain's MarketScore, an algorithm that identifies the 150 most influential blogs based on reach and authority. "We want to get rid of the crazies," Herscher says.
The Blog Impact Report identifies spikes in blogging activity for selected companies and sectors, and provides line graphs visualizing these trends as well as lists of the underlying blogs, according to Herscher, who notes that reports are available for four sectors: technology, healthcare, energy and investing. The reports can be delivered each morning as the market opens, she explains. Clicking on an element in a FirstRain report brings users to a portal where they can search companies and navigate blogs about a specific company, its competitors and its market, Herscher adds.