MoneyLab

  The inaugural post of this blog, A Random Walk down the Stock Market , sets the stage for the challenging task of predicting stock price movement. An efficient market driven by millions of investors competing against each other to uncover profitable trading patterns eliminates the influence of such patterns on future prices. This conundrum underpins the weak form of the Efficient Market Hypothesis (EMH) . But all hope is not lost. Analysing and quantifying information such as growth prospects and market conditions accurately is a costly endeavour. Analysts or predictive models that could sniff out insights from a large mess of information could potentially be rewarded with higher stock market returns. This post is the first of a three-part series that explores the feasibility of building analytical models using financial news data to predict stock price movement (up or down). We start off our series by introducing a very simple yet often effective language model to model word usage