Financial Week on Info-Arbitrage

Penny Herscher points out an interesting article from Financial Week, There's info-arbitrage in cyberchatter. The article features investor-oriented social media analysis services from FirstRain and SkyGrid, with some new quotes and examples of the value of both fact-based market intelligence and sentiment analysis for investors. Most social media analysis services targeting investors have focused on finding information before it is widely known. The article provides some examples of the value in that approach, based on FirstRain's experiences.
FirstRain recently ran an item indicating that Netflix might be expanding its offerings. It culled the info from a blogger who had posted details about his experimentation with game downloads for Microsoft’s Xbox 360 that he’d pulled off Netflix. A large mutual fund manager in New York City who had a stake in Netflix read the piece in his FirstRain news feed—and immediately called Netflix CEO Reed Hastings. The investor hadn’t known that the movie rental service was developing a game console strategy...

David Rosenfeld, the director of research at New York-based William Jones Investment Management, is a FirstRain client. “We try to get information from [a company’s] management, but they are...restricted on what they can actually say,” he said. “So that makes secondary information that much more important.”
The less common approach is to apply sentiment analysis to a selected list of influential sources. SkyGrid is one of three companies I'm aware of applying sentiment analysis to investment decisions.
Greg Parsons of CP Capital, a SkyGrid client, said the sentiment tracker can prove invaluable. A number of times, he noted, “a shift in sentiment has preceded negative news” coming from companies.
In addition to the featured companies, the article points out similar activities from ClearForest, Connotate Technologies, Dow Jones, Instant Information (InfoNgen) and Reuters. Notably missing from the article are Collective Intellect, Jodange and Monitor110. As I was saying, social media aren't just for PR, and the financial sector will be well represented in the second edition of the Guide to Social Media Analysis. If your company is in this space and we haven't talked yet, now would be a good time to get in touch.

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About Nathan Gilliatt

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  • Voracious learner and explorer. Analyst tracking technologies and markets in intelligence, analytics and social media. Advisor to buyers, sellers and investors. Writing my next book.
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