Tag: correlation

EquityBot goes live!

During my time at Impakt as an artist-in-residence, I have been working on a new project called EquityBot, which is an online commission from Impakt. It fits well into the Soft Machines theme of the festival: where machines integrate with the soft, emotional world.

EquityBot exists entirely as a networked art or “net art” project, meaning that it lives in the “cloud” and has no physical form. For those of you who are Twitter users, you can follow on Twitter: @equitybot

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What is EquityBot? Many people have asked me that question.

EquityBot is a stock-trading algorithm that “invests” in emotions such as anger, joy, disgust and amazement. It relies on a classification system of twenty-four emotions, developed by psychologist and scholar, Robert Plutchik.

Plutchik-wheel.svg

how it works
During stock market hours, EquityBot continually tracks worldwide emotions on Twitter to gauge how people are feeling. In the simple data-visualization below, which is generated automatically by EquityBot, the larger circles indicate the more prominent emotions that people are Tweeting about.

At this point in time, just 1 hour after the stock market opened on October 28th, people were expressing emotions of disgust, interest and fear more prominently than others. During the course of the day, the emotions contained in Tweets continually shift in response to world events and many other unknown factors.

twitter_emotionsEquityBot then uses various statistical correlation equations to find pattern matches in the changes in emotions on Twitter to fluctuations in stocks prices. The details are thorny, I’ll skip the boring stuff. My time did involve a lot of work with scatterplots, which looked something like this.

correlationOnce EquityBot sees a viable pattern, for example that “Google” is consistently correlated to “anger” and that anger is a trending emotion on Twitter, EquityBot will issue a BUY order on the stock.

Conversely, if Google is correlated to anger, and the Tweets about anger are rapidly going down, EquityBot will issue a SELL order on the stock.

EquityBot runs a simulated investment account, seeded with $100,000 of imaginary money.

In my first few days of testing, EquityBot “lost” nearly $2000. This is why I’m not using real money!

Disclaimer: EquityBot is not a licensed financial advisor, so please don’t follow it’s stock investment patterns.

accountThe project treats human feelings as tradable commodities. It will track how “profitable” different emotions will be over the course of months. As a social commentary, I propose a future scenario that just about anything can be traded, including that which is ultimately human: the very emotions that separate us from a machine.

If a computer cannot be emotional, at the very least it can broker trades of emotions on a stock exchange.

affect_performanceAs a networked artwork, EquityBot generates these simple data visualizations autonomously (they will get better, I promise).

It’s Twitter account (@equitybot) serves as a performance vehicle, where the artwork “lives”. Also, all of these visualizations are interactive and on the EquityBot website: equitybot.org.

I don’t know if there is a correlation between emotions in Tweets and stock prices. No one does. I am working with the hypothesis that there is some sort of pattern involved. We will see over time. The project goes “live” on October 29th, 2014, which is the day of the opening of the Impakt Festival and I will let the first experiment run for 3 months to see what happens.

Feedback is always appreciated, you can find me, Scott Kildall, here at: @kildall.

 

A Starting Point: Distributed Capital

I’m doing more research on EquityBot —the project for my Impakt Works residency, which I just started a couple of days ago.

EquityBot is a stock-trading algorithm that explores the connections between collective emotions on social media and financial speculation. It will be presented at the Impakt Festival at the end of October.

It will also consist of a sculptural component (presented post-festival), which is the more experimental form.

Many of you are familiar with Paul Baran’s work on designing a distributed network, but many others may not be. He worked for the U.S. Air Force and determined that a central communications network would be vulnerable to attack, and suggested that the United States use a distributed network.
baranInterestingly, there is a widespread myth that the Internet, derived from APANET, was designed to withstand a nuclear attack using this model. This isn’t the case, just that the architects of the internet transmission protocol heard of Rand’s work and adapted it for packet use. Yet, the myth persists.

On a side note, perhaps military technology could be useful for the public good. If only we could declassify the technology, like Baran did.

The distributed network reminds me of a 3D polygon mesh I think this could be a good source of 3D data-visualization: Distributed Capital. I’ll research this more in the future.

But EquityBot isn’t about networks in the formal sense, it is a project about constructing a predictive model of stock changes based on the idea that Twitter sentiments correlate with fluctuations in stock prices. Screen Shot 2014-09-17 at 6.08.23 AM

Do I know there is a correlation? Not yet, but I think there is a good possibility. One of my reading sources, The Computational Beauty of Nature, sums up the value of simulated models in its introduction. The predictive model might fail in its results but it will likely reveal a greater truth in the economic system that it is trying to predict. Thus, knowing the uncertainty ahead of time will provide a sense of certainty. EquityBot may not “work” but then again, it may.

compbeautyofnatureMy source of dissent is the excellent book, The Signal and The Noise: Why So Many Predictions Fail — but Some Don’t by Nate Silver. After reading this, last summer, I was convinced that any predictive analysis would be simply be noise. I was disheartened and halted the EquityBot project (previously called Grantbot) for many months.

la-ca-nate-silver

However, now I’m not so sure. It seems likely that people’s moods would affect financial decisions, which in turn would affect stock prices. With studies such as this one by Vagelis Hristidis, which found some correlation to Twitter chatter and stock, I think there is something to this, which is why I’ve revisited the EquityBot project.

I’ll follow the Buddhist maxim with this project and embrace its uncertainty.