How to Use the Internet Stock Message Board to Estimate the Dynamics of Stock Market

Abstract

In this paper, we analyze the correlation between the stock prices and the human interactions in Internet stock message board. To uncover this correlation, we analyzed the articles concerning with 380 target companies, members of S&P500. And we found that the strength of correlation between the article volume and the stock prices is relevant to the stock returns. Based on this statistics analysis, we proposed a method for recommending stock portfolio and tested the method using a simulated investment. According to the test result, the stock returns of our portfolio is about 1.41% per a month, which is about 0.42% point and 0.15% point higher than those of the S&P500 index and of the Markowitz’s efficient portfolio respectively. This result implies that the collective human behavior on Internet stock message board can be much helpful to understand the stock market and that the correlation between the stock prices and the collective human behavior can be used to invest in stocks.