Richard Peterson, MarketPsych
"Through the lens of this data we can distinguish when investors overreact to information - generating price reversals - or under-react to news - precipitating trends."
New York - Thomson Reuters has extended the analytics offered through its MarketPsych Indices to include individual companies, alongside the indices for countries, currencies, commodities and industries already available.
Behavioral economists have long recognized that investor perceptions affect financial markets in predictable ways. News and social media are increasingly driving investor activity, with many trading decisions based on emotional responses to the stories circulating around particular companies or sectors. The ability to measure the psychological state of the market as represented by these emotional expressions offers significant advantages in defining effective trading strategies. This is especially the case when applied at the level of individual companies.
First launched in 2012, Thomson Reuters developed its MarketPsych Indices in conjunction with MarketPsych, a consultancy specializing in quantitative behavioral economics. The indices provide real-time linguistic and psychological analysis of news and social media, converting qualitative indicators - such as fear, performance forecasts, and trust in management - into quantitative, actionable insight. The new indices cover over 7,500 companies, giving investors new levels of insight into the dynamics behind market movements.
"The addition of company-level Thomson Reuters MarketPsych Indices into our news and text analytics proposition extends our ability to help customers understand the behavior driving financial markets," said James Cantarella, head of Machine Readable News at Thomson Reuters. "They act as a powerful complement to the tools and services we already offer in this area, helping our customers draw a comprehensive and sophisticated picture of market dynamics and act with confidence."
"Thomson Reuters MarketPsych Indices shed light on how global economies and stock prices respond to information," said Dr Richard Peterson, managing director of MarketPsych LLC. "Through the lens of this data we can distinguish when investors overreact to information - generating price reversals - or under-react to news - precipitating trends. This new data helps investment professionals see how markets behave under stress or during trends, and allows them to systematically enhance investment and trading strategies."