DCM Capital and “mood-driven markets”



DCM Capital is an English finance company which, it seems, has created an online platform capable of forecasting stock market trends by monitoring what is happening on Facebook and Twitter. It is all based on an algorithm capable of reformulating the information shared on social networks in order to arrive (and not by chance) at what is referred to in the financial world – as ‘sentiment’.

The basic concept is that if people are in good spirits they tend to hold on to the shares they have, whilst if spirits are low then they tend to sell them. Simplistic? Honestly, I don’t think so. Two years ago a similar algorithm, formulated by Johan Bollen of the University of Indiana, demonstrated it was capable of predicting, with a high degree of reliability, the movement of the Dow Jones three days in advance.

I ask myself what else the Web will reveal to us in the future, when the quantities of shared information will be so much greater and more precise. But, above all, up to what point (and with what effects) will the markets, ever more crucial for the fortunes of the economy and society, depend on our frame of mind at a particular time – our enthusiasm, our anxieties and our states of panic. More decisive regulation on a global scale might perhaps, in some cases, curb our euphoria. Certainly, however, it could help to limit the incalculable effects that, as has been demonstrated by the events of recent years, our volatile and often irrational state of mind can provoke on a global scale.