The research indicates data from Twitter can be used to more accurately predict profit forecasts for companies in the consumer sector.
Lead researcher Dr Stanley Choi of the ANU Research School of Accounting said the study used positive and negative comments from about 250,000 tweets relating to 10 American Airlines.
The study found the more negative comments about an airline’s service including staff, food and luggage, the more accurate the forecasts of a profit decline.
Dr Choi said the study found negative tweets increased analyst forecast accuracy, and they generally pointed to analysts expecting a greater likelihood of less profit. The less negative tweets, the better the expected profit figure.”
The findings challenge the view from most experts that social media commentary is just background noise and of no value.
“These results show Twitter is a reasonably good indicator of profit levels, and the more tweets there are, the closer the forecasts are to being correct,” Dr Choi said.
Financial analysts rely on the latest up to date information to form their forecasts and the real time nature of Twitter makes it a potentially valuable resource as it provides instant feedback from consumers.
“This data allowed us to better forecast whether those customers are likely to continue to use an airline.”
“Twitter shows across the market what consumers are feeling about the service of a firm, which is information you may not be able to get from other sources in such a timely manner.
”The study is published in the Journal of the Association for Information Systems.