This week, Twitter introduced a new hashtag symbol, or rather, the “cashtag.”
Instead of the omnipresent hashtag “#” , the addition of the symbol “$” added in front of any ticker will instantly provide context for that stock, collecting all tweets that use the ticker, so users can easily peruse and monitor the conversations around the stocks in real-time. The cashtag joins the “@” symbol and hashtag as the only official interactive operators on Twitter.
— Twitter (@twitter) July 31, 2012
The Origins of the Cashtag
StockTwits, a social community for traders and investors, originally created the cashtag in order to give their community the ability to aggregate updates and conversations around specific stocks. With Twitter adopting the cashtag, users will have a broader snapshot of the conversation and sentiment around specific stocks.
Twitter and Stock Market Predictions
Johan Bollen, Informatics and Computing professor at Indiana University, discussed his findings on the connection between social media and the Dow Jones Industrial Average back in February on CNNMoney.com. He explained that the public’s collective mood on Twitter correlates to fluctuations in the stock market, and that the public’s overall anxiety and mood seems to predict the Dow closing values three to four days in advance with 80% accuracy.
London-based firm Derwent Capital Markets successfully used Bollen’s system for the the world’s first Twitter-based hedge fund, Absolute Returns Fund. During the one month they were open, the firm reportedly returned 1.86 percent, better than most hedge funds. Despite Derwent’s success in using social media to predict the ups and downs in the stock market, the problem was marketing the idea, which isn’t surprising, as the financial services industry has been slow to adopt social media.
Twitter introducing the cashtag confirms that social media has indeed made it to the stock market. We use social media to connect with friends and family, find love and friendship, learn and share, find employment and opportunities, recruit and hire, conduct market research and provide customer service, and now, find real-time news around stocks and even predict the DOW.
What do you think the cashtag means for the future of investment banking? Do you think the cashtag will help with stock market predictions? For more on this topic, check out The Social Media Invasion Has Made its Way to the Stock Market. And read how Clemson University students used social media to predict foreign exchange markets.