Wall Street & Technology is part of the Informa Tech Division of Informa PLC

This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them. Informa PLC's registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 8860726.


11:35 AM
Justin Grant
Justin Grant
Connect Directly

Twitter-Based Hedge Fund Makes Debut

Derwent Capital Markets, the London-based hedge fund that's relying on Twitter to predict market moves, made its highly anticipated debut today armed with more money than expected in its coffers.

The fund was originally slated to launch April 1 with $40 million in assets, but due to strong demand from global investors it had to delay its debut. According to a HedgeFund.net report, the firm began trading today with an additional $100 million under its belt.

"For years, investors have widely accepted that financial markets are driven by fear and greed but we've never before had the technology or data to be able to quantify human emotion. This is the fourth dimension," Derwent co-creator Paul Hawtin wrote in a statement to HedgeFund.net.

And while plenty of skeptics abound, Derwent's gamble has generated plenty of excitement in academia and on Wall Street. If proven successful, the strategy will undoubtedly ignite copycat trading strategies and further research into how Twitter can be used to gauge global thought on a range of issues. I for one am certainly intrigued.

If Twitter can be used to predict election results, box office receipts for movies, and even to mobilize people in the overthrow of governments, why can't it successfully be deployed to foretell the stock market? Johan Bollen, an Indiana University professor and Derwent consultant, built the algorithm and said it managed to successfully predict market moves in the fall of 2008, even as the economy imploded amid one of the most volatile periods for equities trading in U.S. history.

On the other hand, unpredictable events happen all the time and there's simply no technological model for that. And through the years there have been plenty of funds to claim they can predict what's going to happen days in advance, only to go out of business when their strategies inevitably fail.

But the most fascinating aspect of Derwent's plan is no firm has ever tied its trading decisions to social media. Today could mark the start of a revolution on Wall Street. Stay tuned.

As the Senior Editor of Advanced Trading, Justin Grant plays a key role in steering the magazine's coverage of the latest issues affecting the buy-side trading community. Since joining Advanced Trading in 2010, Grant's news analysis has touched on everything from the latest ... View Full Bio
More Commentary
A Wild Ride Comes to an End
Covering the financial services technology space for the past 15 years has been a thrilling ride with many ups as downs.
The End of an Era: Farewell to an Icon
After more than two decades of writing for Wall Street & Technology, I am leaving the media brand. It's time to reflect on our mutual history and the road ahead.
Beyond Bitcoin: Why Counterparty Has Won Support From Overstock's Chairman
The combined excitement over the currency and the Blockchain has kept the market capitalization above $4 billion for more than a year. This has attracted both imitators and innovators.
Asset Managers Set Sights on Defragmenting Back-Office Data
Defragmenting back-office data and technology will be a top focus for asset managers in 2015.
4 Mobile Security Predictions for 2015
As we look ahead, mobility is the perfect breeding ground for attacks in 2015.
Register for Wall Street & Technology Newsletters
7 Unusual Behaviors That Indicate Security Breaches
7 Unusual Behaviors That Indicate Security Breaches
Breaches create outliers. Identifying anomalous activity can help keep firms in compliance and out of the headlines.