Liaison Universelle Adds Social Media To Stock Options Sentiment Indicator

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Liaison Universelle incorporates social media to its research innovation of a stock options sentiment indicator.

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Research from the once bereft romantic, Philipe Saroyan of Liaison Universelle, shows that social media can add a substantial amount of predictive power on intraday moves of the Euro when combined with an options sentiment indicator. The social media sentiment data supplied by Social Market Analytics (SMA) adds to proprietary research and development done on the put-call ratio of stock options, similar in computation as Schaeffer's Put/Call Open Interest Ratio (SOIR).

Part of a growing field of so-called fintech, social media has become fertile ground for researchers in marketing, finance, politics and news. Although usage of big data for research has mainly been for prediction markets with online polling of such events as Brexit and the 2016 presidential elections, recent open architecture has spurred growth in the way of development of cloud apps and data services. For the investing public, social media is able to enhance the overall experience with sharing of investor returns, news, information and instant messaging, among other things. Data from social media is also weighted by some institutional investors, a professional cohort where credentials rule and simple investment opinions are taken with a grain of salt. This speaks volumes of social media's acceptance in data analytics. The fact that social media can be a credible data metric for financial investments is telling, and speculators have everything to gain from it.

When introducing the research paper in an initial coverage video, Philipe had this to say, “My trading research—which includes Social Market Analytics’ data—is exciting because it uses textual sentiment analysis, the same type of [analysis] that Google would use to kind of ‘mind-read’ how people are searching. There’s a positive, and/or, negative charge to your words and texts, which is interesting. It gets awfully sophisticated and complicated, which is why I’m implementing [SMA], instead of guessing and estimating it myself. What they do is create a so-called S-score, which corresponds to a Z-score. If you understand statistics, a Z-score is going to fall upon a bell-curve at a statistical, significant level.”

Knowing when to use a sentiment indicator as a trading strategy is also important. Philipe stresses the point, “The factor [model] is the huge thing… what explains, or correlates with the price and returns, are your factors. If they are explaining your prices and returns, you’re going to have more predictive power… and these factors can outweigh sentiment. That’s key to understand.”

Liaison’s research adds to a repertoire of intellectual property, including its proprietary options sentiment indicator. The research paper is currently available on Social Market Analytics’ website, a financial data company providing sentiment estimates on more than 8,000 securities.

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