The question of whether societies experience mood states that affect their collective decision-making is a provoking one, and it’s one that Dr. Johan Bollen – a computational mathematics researcher at the University of Indiana – asks in his 2011 paper “Twitter mood predicts the stock market.” In the past five years, the potential of speculative markets to accurately forecast trading behavior has attracted the attention of several prominent business writers.

James Surowiecki’s The Wisdom of Crowds, Cass Sunstein’s Infotopia, and Douglas Hubbard’s How to Measure Anything: Finding the Value of Intangibles in Business evidence this point. Traditional thinking about holds that market losses precede negative feelings, where in fact the opposite is true: negative feelings precede market losses.

Dr. Bollen and his colleagues used large-scale Twitter feeds to investigate the public mood and examined the correlation to the value of the Dow Jones Industrial Average (DIJA) over time.

Mood tracking tools OpinionFinder (measures positive vs. negative mood) and Google-Profile of Mood State (measures moods in terms of calm, alert, sure, vital, kind, and happy) calibrated the emotional timbre of the text content in these large-scale Twitter feeds. To test the reliability of these tools, Bollen’s team cross-verified public sentiment with the 2008 presidential election and Thanksgiving Day.

At 87.6 percent, the accuracy rate of this correlative analysis is surprising. Even more surprising is that Dr. Bollen’s methods account for more than a six percent reduction of the Mean Average Percentage Error (MAPE) employed by other market prediction methodologies.

Because negative public mood states are strong predictions of changes in Dow Jones Industrial Average closing values, companies like UK-based Derwent Capital Market and US-based Wise Window have spent millions on speculative analysis. While Dr. Bollen’s study is innovative in its methods, his conclusion reflects Beyond Philosophy’s position that social media is the next game-changer in customer experience management.

If you are interested in learning more about how behavior economics and customer experience management overlap, see our blog “Rethinking Objectivity: How to Use Emotions in the Customer Experience for Effective Decision Making.”