Financial Crisis Means Banks Must Communicate Better

I came across an interesting post at Advertising Age titled, "How Banks Can Boost Image in Chaotic Times."

In a nutshell, the article states that financial instutions will have to take bold actions that exceed expectations, communicate effectivley and be managed efficiently. Additionally, banks will have to find new ways to add value during these difficult times.

I feel the author, Tom Agan, is correct in his assessment that banks will have to communicate more effectively. In fact, banks that communicate effectively should be able to ride out the current crisis affecting our financial markets. However, banks that fail to communicate effectively will only find themselves in more trouble.

Can "Short Selling" Buzz Predict Market Conditions?

Below is a graph showing some interesting findings comparing discussion about “Short Selling” stock and the Dow Jones Industrial Average (DJIA) between January 2007 and early September 2007. As you can see, online discussion about “Short Selling” peaks Jan 07’ through March 07' and again June 07’ through August 07’. Interestingly, the DJIA increases between April 07’ – May 07’ when discussion about “Short Selling” goes down. Now I’m not saying online buzz about “Short Selling” is predictive of market conditions, but it warrants attention.



Feel free to contact me if you have any questions about this posting or methodology.
Have a good weekend!

Marketrman

"Sub-prime" Discussion Blasts Off

I have to apologize for not posting in a while, but I have just recently purchased my first new home and it took me a while to get things moved in and put away. Therefore, I am now a proud member of the "homeowners" club! Fortunately, I didn't let the "sub-prime" crisis scare me away from buying my first home. I am very optimistic about the housing market and feel it is a great time for buyers.

I have become increasingly aware of the "sub-prime" mortgage crisis, especially now that I own a home. Therefore, I decided to see what all the recent buzz is about. Also, I thought it would be ironic if my first posting since closing on my new home related to increasing "sub-prime" discussion.

As you all know, the financial markets are under a lot of scrutiny by consumers and the feds. Buzz regarding the "sub-prime" crisis has really taken off. The analysis below shows "sub-prime" discussion along with a few other topics financial related topics. I wanted to see if discussion about select financial institutions or investments are congruent with "sub-prime" discussion.

The analysis shows some interesting results. Distinct callouts include finding out that that online discussion Countrywide Home Loans and "hedge funds" in general correlate with "sub-prime" discussion, r = .71 and r = .72 respectively. Countrywide's discussion coincides with "sub-prime" as a result of consumers acknowledging that it began laying off employees due to the mortgage crisis in August 2007. Additionally, the fallout of several major "hedge funds" and other mortgage related securities has led to growing concerns amongst consumers online.

Feel free to contact me regarding these findings. I will continue tracking "sub-prime" discussion and update my findings as they are available.

Can Online Discussion be used to Predict Interest in Exchange Traded Funds (ETF's)?

A co-worker of mine came to me a few days ago and asked whether exchange traded fund (ETF) discussion has trended down and if so, would that be a leading indicator that ETF popularity will be decreasing. Therefore, I set up a small project to see whether a correlation between online buzz and trading volume existed. The results are very surprising.

First I wanted to see how online discussion about ETF's in general was trending. Discussion rose significantly from October 2006 to April 2007. However, discussion started to level off, then pick up again in early July 2007.



Second, I wanted to see how trading volume for specific ETF's trended over time compared to online discussion. Therefore, I looked at two ETF's, PowerShares Gldn Dragon Halter USX China (PGJ) and iShares MSCI Malaysia Index (EWM). Interestingly, there seems to be some correlation between online discussion and trading volume for ETF's. PGJ's average trading volume has a .79 correlation with online discussion about the fund while EWM's average trading volume has a correlation of .84 with online discussion. Overall, these are rather impressive.

Now I am not a finance guru by any stretch of the imagination. However, I do think this analysis provides some insight. Discussion volume and trading volume for both ETF's peak between January and March. Interestingly, share prices for both began to flatten.

I am not saying that online discussion should be used when evaluating whether to purchase an ETF, but it does warrant some attention. Typically, higher trading volumes indicate that more investors are buying (stock price goes up) or selling (stock price goes down) a particular stock.

I have yet to determine the cause and effect relationship between online buzz and trading volume for ETF's. However, I'm sure it is possible if I am able to review "real time" information about how people are talking. For example, Apple shares plunged $8.00 on Tuesday, July 24, 2007 when the first wave of "activation" numbers came through. I could have speculated increased trading volume would follow if consumers were saying things like "I'm going to be selling my Apple stock since iPhone sales were disappointing." In contrast, increases in trading volume may cause online discussion if investors discuss the transaction after the fact (i.e. "I sold my Apple stock today since iPhone sales were lower than expected").

* Average trading volume information came from Yahoo finance historical information for EWM and PGJ.

On a separate note, I'm sorry for not leaving a post in a while. I have been very busy trying to complete the purchase of my first home. I close on August 21, 2007. Feel free to send an e-mail to www.conceptsmarketingresearch@hotmail.com or leave a comment regarding anything I've posted today or in the past.