Alacra: Hedgies Monitoring Blog Posts

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By Barry Ritholtz - May 5th, 2010, 2:30PM

Hey, this is quite interesting:

Data firm monitoring influential blog sites

Hedge funds are testing out a data feed produced by monitoring a group of financial commentators that includes bloggers. The trial is still at an early stage, but it shows how seriously the investment community is taking the opinions of those working outside traditional media outlets.

The feed – put together by Alacra, a data aggregator – monitors the output of around 25,000 analysts by combing the web for their comments. This group contains a number of prominent bloggers, such as Barry Ritholtz, Henry Blodget, Felix Salmon and Fred Wilson.

Hedge funds are taking that feed, mixing it with other data, and using the combination to try to create successful algorithmic trading strategies. So far, the data suggest stock prices outperform when sentiment at a given company has been positive for a number of weeks.

Alacra tries to differentiate itself from other data aggregators by monitoring only a select group of what it feels are influential sources on the web. It also hones in on quotes to analyze sentiment, as it believes this is more accurate than analyzing the language of a whole article.

Way cool . . .

Source:
Blogger output helps hedge funds to trade
Cross Border, May 04, 2010
http://www.thecrossbordergroup.com/pages/1913/Breaking+news.stm?article_id=13986

Comments

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data, ability to repeat discredited memes, and lack of respect for scientific knowledge. Also, be sure to create straw men and argue against things I have neither said nor even implied. Any irrelevancies you can mention will also be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

37 Responses to “Alacra: Hedgies Monitoring Blog Posts”

  1. Marcus Aurelius Says:

    I’ll have to start posting counter-opinions along with my comments.

    Markets are stable. Fundamentals are sound. Doesn’t really matter where you put your money — it’s blue sky and profits from now on.

  2. Charlatan Says:

    February 9, 2010 (S&P 500 at 1070): “So, was that it?…Is the worst of the market correction now over?.. I don’t buy it — how about you?”

    April 20, 2010 (S&P 500 at 1207): “The fact that individual investors are not grossly over allocated to stocks at this point suggests they still have a fair amount of liquidity to invest. As long as liquidity remains favorable stocks should not experience any deep setbacks.”

  3. Mr.E. Says:

    Interesting prospects – seems ripe for manipulation.

  4. How the Common Man Sees It Says:

    cognos is really going to mess up their algo’s

  5. How the Common Man Sees It Says:

    I think this is what google is planning/building/doing. Except that they aren’t just doing it for the markets, they want to do it for everything. Everything that you can put a dollar sign on. Maybe opinions and political things too. They also haven’t quite admitted it yet

  6. wally Says:

    If you believe that ‘investment’ is based on outguessing other people’s psychology rather than on the idea of finding a business that will make good money in the future, then this is the way to go.

    And, on balance, that seems to be what most “investors” today actually believe.

  7. Rich_Lather Says:

    Garbage in, garbage out.

  8. How the Common Man Sees It Says:

    Not just psychology wally but their actions also. They want to get to the trade just before the crowd does. Who cares how good the product is as long as they can sell it to someone walking in the door right behind them. It is the greater fool theory gone hedge fund

  9. Harleydog Says:

    Barry,

    love your site and your work Barry but sadly the word prominent is rendered useless when one catagorizes a Henry Blodgett as being a prominent anything other than DOUCHE BAG extraordinarie.

    Exercise extreme caution with all emails Henry and like Dracula at all costs mirrors are to be avoided.

    HD

  10. Mark E Hoffer Says:

    this is, just, another application of previously existing technology..

    see, http://www.kmworld.com/Articles/News/Breaking-News/Unquestionable-semantics-60899.aspx

    Attensity Group’s full offering of semantic engines and applications along with Inxight technologies from SAP BusinessObjects. AGS says that government agencies can now leverage the capabilities enabled by the combination of Inxight’s multilingual advanced entity and event extraction with that of Attensity Group’s Exhaustive Extraction, which automatically identifies and transforms the facts, opinions, requests, trends and troble spots in unstructured text into structured, actionable intelligence…
    ~~
    http://www.kmworld.com/ is a good source, more People should read it..

  11. curbyourrisk Says:

    Unless th list includes Karl Denninger…..it don’t mean much.

  12. tradeking13 Says:

    great, more algos. just what we need.

  13. Arequipa01 Says:

    Hey Hedgies-

    Here’s an idea. Figure out what multi-transient EM means for deep sea drilling. Here’s a question: Did Monte Carlo mumbo-jumbo create an image of proved reserves under Deep Horizon that didn’t adequately discriminate between oil and gas deposits?

    Here’s another idea. Get a subscription to journals like Petroleum Science & Engineering or Remote Environment Sensing or Membrane Science. Also, ask yourselves what is Potomac Publishing and why I must have access if I want to trade the GOVT TRANSFER PAYMENT TO THE RICH play. (blah, blah, blah_taxes, end of the world, Blankfien is just fine)

    And finally, got to incakolanews and buy the one of the BEST deals in junior mining analysis in the universe:

    http://incakolanews.blogspot.com/

    Tell him Puka Runtu sent CHU and he’ll include a complimentary picture de una calata de las buenaaas!

  14. R. Cain Says:

    ‘Of all the mysteries of the stock exchange there is none so impenetrable as why there should be a buyer for everyone who seeks to sell.’

    John Kenneth Galbraith
    The Great Crash 1929

  15. b_thunder Says:

    If such data feed really exists, and if hedgies use it to make trading decision, I’m curious about the following:
    If several/many/all the influential bloggers write about some small-cap, can they cause a mother of all “pump-and-dumps?” And could the bloggers be later sued by SEC for “instigating” it?

  16. b_thunder Says:

    I wish the Fed chair had access to the same data feed. Then perhaps he’d be able to identify things like, say, giant RE bubbles that the bloggers wrote about since 2005 if not earlier!

  17. Arequipa01 Says:

    @b_thunder:

    http://incakolanews.blogspot.com/2010/05/casey-research-pyramid-scheme.html

    Just a perspective.

    Also, Americas Petrogas (BOE..toronto) Yohnny Pacheco recommended a look in June or July here last year. A fundamental value argument+.

  18. callistenes Says:

    BR–market mover, maker and shaker makes 3

    maybe its time for some makers mark:)

  19. Transor Z Says:

    Blogger Barry Ritholtz embeds a picture of a cat in a post. Ritholtz likes dogs. In the seconds before the post gets its first hit, the post is both relevant and irrelevant to markets and the cat is therefore both alive and dead. Simultaneously. Then the first viewer reads the post. Q: Is the cat alive or dead? A: Who cares? Ritholtz likes cats.

  20. Transor Z Says:

    likes dogs … whatever.

  21. call me ahab Says:

    TZ-

    I see you are throwing out a bit of quantum w/ your take on the Schroedinger’s Cat paradox

  22. TakBak04 Says:

    @Transor Z Says:
    May 5th, 2010 at 3:56 pm

    Blogger Barry Ritholtz embeds a picture of a cat in a post. Ritholtz likes dogs. In the seconds before the post gets its first hit, the post is both relevant and irrelevant to markets and the cat is therefore both alive and dead. Simultaneously. Then the first viewer reads the post. Q: Is the cat alive or dead? A: Who cares? Ritholtz likes cats.

    ———-
    Good Point as to how they “Tag” the stuff on BR.. I think Barry thinks they are only Tagging his Posts and we (who post on his site) might think they are including BOTH.

    Real answer is they are using “Keyword Search” for Barry and ignoring his commenters. And, if things can’t get weirder with the “Google Generation” ……WELL….they just did!

    Let it go..because there’s a “Ridiculous Quotient” to the whole thing. LOL’s

  23. gloppie Says:

    DJIA 3600
    DJIA 360
    DJIA 36
    DJIA 3.6

    If I can confused the algorithm just long enough, maybe I can get agent Smith to lay off me.

  24. TakBak04 Says:

    BTW….Siamese are delightful intelligent cats……Mystery writers and readers are prone to liking cats.

    As I recall…BR has two “rough and tumble dogs”……I don’t see him as a “cat person” even though many of his readers are probably of that “type.”

  25. Transor Z Says:

    @takbak04: Yeah, I messed up the punchline re: cats/dogs.

    Posts only or posts + comments = Big observer effect in either case

    Just in case, this one’s for Alacra’s benefit:

    buy hold bullish up recovery green shoots love me some bernanke alan greenspan is my personal hero upswing nowhere near a top yet drill baby drill god bless america greatest country in the world buy buy don’t believe the permabears i hate big government we need less regulation see you at the tea party

  26. Mannwich Says:

    Well done, Transor.

  27. dss Says:

    These people need algo’s to figure out sentinment? ROFL.

  28. Mannwich Says:

    @dss: I think BR needs to steal from Sports Illustrated (of all places) and do a periodic post on “This week’s Sign the Apocalypse is Upon Us” basically giving us the most aburd item of the week (might be difficult to choose just one a week these days though). This one would make the grade, IMO.

  29. dss Says:

    You can’t take them seriously if they include Blodgett, really.

  30. constantnormal Says:

    Anybody (and that includes hedge fund managers, traders, newbies, economists, and idiots — but I repeat myself) wrote writes or says anything about the markets is ladling out an uncertain amalgam of talking their book, fishing for clues, and promoting their opinions and beliefs (whether substantiated or not). If there exists software that can sift through all that and extract anything of significant value, then the software is smarter than the best that humanity has to offer, and we had better begin bowing down to it.

    All hail SkyNet!

    Data mining is the phrenology of the 21st century.

  31. constantnormal Says:

    Instead of “extract anything of significant value”, I meant to say “can spin that particular silk into gold”, but WordLess puked me out and made me log back in again, so my attempt at clever wordsmithing was left on the cutting room floor of my mind as I attempted to remember what I had just typed, only to be discovered by the janitorial staff.

  32. constantnormal Says:

    And sorry for the OT diversion here, but seeing as this is one of those Seinfeld posts (a buncha people in a virtual room, talking about nothing), take a look at this chart …

    http://link.businessinsider.com/view/d67.10r/44e1d406

    And while it obviously shows the stock market squirted high upon a fountain of free money, exhibiting a remarkable disconnect from the economy, when it eventually DOES re-connect with the economy (or its proxy as shown here, industrial production), will that free money allow it to correct all the way back to some sort of proximity to the industrial production line on this chart? Or will it keep the S&P above the stratosphere, while the economy grinds the people through its gears, way down below?

    I do realize that the industrial production line can stay where it is, or even be rising and have the S&P fall from the skies to meet it — in fact, I think that would be the case if the Fed were ever forced to stop it already with the free money (I do believe that they will eventually be forced to do so, and that they will never do so willingly) — but most likely, when the S&P begins to plummet back to earth, it will be because either the free money spigot has been turned off, or the industrial production line begins to fall once more (for whatever reason, the most likely being that the Fed has been forced to behave).

    There is also the possibility that the S&P is merely leading the industrial production, and that we will see industrial production leap upward like a phoenix to catch up with the markets … but I think that’s a pretty slim possibility, at least while we still have massive unemployment and our real estate asset base continues to implode.

    Any way you look at this, it’s a picture of a remarkable disconnect between the economy (as represented by industrial production) and the stock markets, pretty much unprecedented since 1965. Gotta wonder how long this deranged, demented system can continue to function like this.

  33. constantnormal Says:

    Or maybe all that the chart means is that industrial production is dead as a proxy for the economy, and organized fraud is the new mainstream. We just don’t have a good way to measure the extent of “organized fraud”, except maybe via the FAS ETF (I couldn’t find an unleveraged ETF on financial stocks, perhaps that’s appropriate).

  34. Transor Z Says:

    @constantnormal:
    I’m going to go with your 9:26 pm explanation.

    buy emerging markets china is not a bubble never a better time to buy a home low rates we’re seeing YoY growth in all sectors of the economy the fed knows what it’s doing we’ve turned the corner everything’s coming up roses

  35. TakBak04 Says:

    dss Says:
    May 5th, 2010 at 8:45 pm

    You can’t take them seriously if they include Blodgett, really.
    ———

    Exactly…If ever there was a Babel Mouth..the Algo’s will have a time with it…. and Kudo’s to “Constantnormal” for his posts on gibberish that could be picked up by keyword searches! :D

  36. dss Says:

    They might be closet Cramer watchers, too. Imagine the algo’s he would generate.

  37. Small-Cap CEO Lesson: Hedge Funds Are Now Monitoring Blog Posts As Part Of Their Black Box Trading « AGORACOM Blog Says:

    [...] (Hat Tip to Barry Ritholtz) [...]

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