The market sentiment is the intuitive feeling of the investment community regarding the expected movement of the stock market. For example, if market sentiment is bullish. then most investors expect an upward move in the stock market. There are various technical and statistical methods used to measure market sentiment such as advancing versus declining stocks, new highs versus new lows. .
Does Social Media Reflect a Different Sentiment?
Mediasentiment.com states A January 2006 research report conducted by the Federal Reserve Bank of St. Louis stated: “Optimistic and pessimistic language is predictive of firm performance in future quarters. We interpret the evidence to suggest that managers use optimistic and pessimistic language in earnings press releases to provide information about expected future firm performance to the market. We find a significant market response to the levels and unexpected amounts of optimistic and pessimistic language in earnings press releases.”
Further explaining how media sentiment can move the market, a 2004 San Francisco Federal Reserve Board Report restated: “The perceptions of consumers may be influenced not only by the content of the news stories they come across but also by the way the media cover the economy-specifically, the tone reflects the language used, and the volume reflects the number of articles about the economy.These results suggest that consumers pay attention to the media’s reporting of the economy and that perhaps the tone and the volume of reporting affect consumers’ perceptions above and beyond the facts and opinions being reported.”
Doc Searls refers to markets as conversations and with the advancement of conversational computing individuals are creating new sentiments about anything and everything. Sentiments reflect feelings and emotions which in turn can be reflected in media. No longer contained and controlled by old media models the new media is the voice of individiuals, one to one to millions at the click of a mouse. These voices are reflecting real life experiences with brands and replacing old media hype with customer sentiments about the quality of a product, service or experience.
Consider how major brands are now engaging in the conversational web. Brands are using the new “social tools” and engaging in communicates and conversations everywhere. However most of the methods brands are using old media methods to a new media environment. While the tools may be the same the audience is now directly reacting to or in many cases creating the message.
In looking at the intents of MediaSentiment.com one can easily see the emergence of a new market influence. The new influence on a brands stock behavior may no longer be what the old markets say but what the new markets says, the conversational threads of people. Doc Searls proclamation that markets are conversations is emerging as the new market influence and it is just a click away from being stronger than old market sentiment methods.
Consider the implications.