New Twitter-Based Hedge Fund Beats the Stock Market

nonprofiteer writes "Derwent Capital, a new hedge fund that makes trades and investments based on Twitter sentiment, beat the market — and other hedge funds — in its first full month of trading. From the Atlantic: 'Using an algorithm based on the social media mood that day, the hedge fund predicted the market to make the right trades. Sounds unbelievable that something cluttered with mundane musings and media links could have anything smart to say about the market. But it's working so far.' Blind luck?"

Re:One whole month!

[TheRaven64]

There's an old scam that works because of this. You set up a few funds, say 30, and make random trades with each one. On average, most of them will do about as well as the market as a whole. A few of them will do much worse. You close these. A few will do much better. You then get people to invest in these (with the obligatory disclaimer that past performance does not ensure future returns).