Outperforming the Equities Market Using Social Sentiment and the “Wisdom of Crowds”

Zuzanna Pasierbinska-Wilson

Social media arrived late to the financial services party, but it’s making up for lost time. In fact, the concept of social finance, networked investing and community researching is steadily turning the investment community upside down.

Array Analytics has been an early champion of this trend. The company believes that platforms which effectively employ the “wisdom of crowds” can level the playing field for the individual investor, in support of improving decisions and investment returns.

“Picking which members to trust or which traders to follow isn’t much easier than choosing which stock to buy,” says Frank Lortscher, President and CEO, Array Analytics. “A tool was needed that could work both at a detailed level validating individual participants and at a broader level gathering market and company commentary.”

Frank and his team have spotted this opportunity early. Array’s patented “wisdom of crowds” platform—a smart collaboration engine—filters, matches and aggregates profile and transaction social data. It works on data related to a variety of industries, from peer-to-peer lending to currency trading.

DataSift supports this application of the “Wisdom of the Crowds” system, collecting any type of unstructured data through a single API. Array uses this best-in-class solution to aggregate, process and deliver social content (currently Twitter, although other sources including WordPress and Facebook are in development and will be added soon).

DataSift augments the rudimentary filtering performed by Twitter. DataSift searches hundreds of unique fields, including location, language and demographics across dozens of social platforms. It also increases filtering flexibility by applying a single filter across multiple data sources—for example filtering according to language. And the solution provides access to billions of historical social posts to provide Array and its customers with historical perspective on investment trends.

Array Analytics funds outperform the market

“Without DataSift half of our business would not exist,” says Frank. “DataSift is the cornerstone of Array’s go-to-market strategy, helping investors become more profitable and helping brokers have more profitable customers. By automating the signal process, DataSift saves the equivalent of one full-time employee.”

Array’s application for public securities—based on DataSift—has been so successful that the company has partnered with an investment management company to launch a fund based on social sentiment derived from social data. Recommendations and reporting performance are shared on the StockTwits stream.

In the first quarter of going live, the fund outperformed both its benchmark and the market as a whole. While the market was down approximately 4% (at the time of writing), the Array fund was up 2.5%. Frank concludes, “We couldn’t survive without DataSift, it’s as simple as that. DataSift drives all of our social investment research.”

Zuzanna Pasierbinska-Wilson

Written by Zuzanna Pasierbinska-Wilson

Zuzanna is SVP, Marketing at DataSift. You can follow her @fattypontoonski.

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