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FINANCIAL SERVICES | Staff Reporter, Singapore

Here's what you need to know about Sentiment Analysis in finance

Singapore is about to be introduced to a new domain.

The world is now connected to news and information everywhere, narrowing the gap between locations and accelerating the speed of information processing. Data scientists and financial experts are trying to catch up with these evolutions by automating the extraction of sentiment from news. In simpler words, Sentiment Analysis is used to understand the reaction of a person or a group of people to a particular news item. Sentiment analysis is an emerging area where structured and unstructured data is analyzed to generate useful insights leading to improved performances. Information obtained from multiple sources including news wires, macro-economic announcements, social media, micro blogs /twitter, online (search) information such as Google trends and Wikipedia influence both business intelligence and performance evaluation. This sentiment data can help investors and finance professionals to exploit the market and manage their risk exposure.

There is continuous research on this topic by experts all over the world and therefore development in this field is also fast gaining momentum in the Finance industry. Prof Tobias Preis, of University of Warwick, aims to answer two questions in his research studies. The first, can big data resources provide insights into crises in financial markets and the second, can we provide insight into international differences in economic wellbeing by comparing patterns of interaction with the Internet? The results of his research as mentioned on the Washington Post and Daily Mail, show patterns indicating stock market movements and provide some explanation of large-scale human economic behavior, keeping in mind the fact that Internet users can access more data in the future. In the ‘Handbook of Sentiment Analysis in Finance,’ Professor Gautam Mitra has described a model by which we can measure the impact of sentiment. This handbook will be launched on the 10th of March during the conference on Sentiment Analysis in Finance in Singapore, where many contributors will also be present.

Focusing on social media, Prof Enza Messina, co-founder of Sharper Analytics, researches into Twitter and carries out text and network analysis for sentiment mining. Her research shows how social relationships can be managed to improve user-level sentiment analysis of micro blogs. Weibo (the Chinese equivalent to Twitter) has also been studied to find out sentiments within China. The Chinese equity market has seen an increase in the number of retail investors in recent years, raising interest for Eric Tham, Director of Quantitative Strategies at iMaibo. Analysing two sources of domestic online media-news and social blogs media- Eric determines the factors that have led to this change.

Commodity trading is yet another application for sentiment analysis, as it is important to understand whether news sentiment affects commodity prices and if yes, how do they do so? Answering this question in her interview with Reuters Insider, Svetlana Borovkova explained how to make profitable trading strategies and avoid the downside. Research in the Finance lab of IIM Calcutta has shown that the effect of any news on financial markets depends on the attention of investors as stated by Ashok Banerjee, Departmental Head of Finance and Control. This follows the simple logic that processing any attention-grabbing event requires effort and in absence of that effort (Attention), data (Sentiment) can be missed.

The studies on sentiment in financial markets have focused on equities, but researchers at MarketPsych focus on currencies and test out the application of sentiment strategies to this asset class. Chanjie Liu will discuss these findings in the conference being held in Singapore: Sentiment Analysis in Finance on 10 -11 March 2016. Elijah DePalma of Thomson Reuters will also be present to shed light upon his findings with working on sentiment for the Japanese language.

Sentiment Analysis in finance is a new domain of knowledge; brought to Singapore for the first time. In this conference on Sentiment Analysis in Finance, thought leaders and subject matter experts from Europe, UK, USA and AsiaPac region (including India and China) present their findings, their knowledge and the current state of the art in this fast-emerging field of Sentiment Analysis Applied to Finance. They will shed light on how massive amounts of data can be used to construct actionable strategies for (i) trading, (ii) fund management and (iii) risk control.


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