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docs(book): Expand Chapter 13 Sentiment Trading with disaster-driven pedagogy
- Expanded from 6,629 to 9,362 words (2,733 words added, 41% growth)
- Added 533 lines of content and production code
NEW OPENING:
- AP Twitter hack flash crash (April 23, 2013)
- $136 billion market cap evaporated in 120 seconds
- Timeline: fake tweet → crash in 2 min, human recovery in 10 min
- Lesson: Sentiment trading without verification = pure gambling
NEW SECTION 13.8: Sentiment Trading Disasters (~2,500 words)
- 13.8.1: Elon Musk 'Funding Secured' (Aug 2018)
* $40M SEC fine, stock +10% on fake news
* Trading volume 14.5x spike in 1 minute
* Lesson: Single-source dependency = manipulation risk
- 13.8.2: Investment bank sentiment desk failure
* 70% false positive rate ("too annoying for traders")
* Sharpe 1.8 backtest → 0.3 live (overfitting)
* Bid-ask spread killed 2/3 of signals
* Lesson: Academic accuracy ≠ trading profitability
- 13.8.3: Social media pump-and-dump ($100M+, 2022)
* 8 influencers charged by SEC
* Discord coordination + Twitter hype
* Retail losses $100M+ holding bags
* Lesson: Positive sentiment can be manufactured
- 13.8.4: Disaster patterns table
* Fake news (AP): 1-2/year, $100B+ market cap losses
* Manipulation (Musk): Monthly, $40M fines
* False positives (Bank): Ongoing, 70% FP rate
* Pump-and-dump: Weekly, $100M+ retail losses
NEW SECTION 13.9: Production Sentiment System (~300 lines OVSM)
- Multi-source sentiment aggregation engine
- Source verification framework:
* Domain verification (prevent fake accounts)
* Account age >6 months
* Historical accuracy >60%
* Bot detection (<30% bot followers)
- Confidence-weighted aggregation
- Sentiment decay (exponential, 4-hour half-life)
- 3+ sources requirement → reduces FP from 70% to 2.7%
NEW SECTION 13.10: Summary and Key Takeaways (~800 words)
- What works: Multi-source (3+), verification, confidence >75%, decay modeling
- What fails: Single-source (AP, Musk), no verification (70% FP), trusting hype
- Disaster prevention checklist (7 items, $300-800/mo cost)
- Realistic 2024 expectations (Sharpe 0.6-1.2, win rate 55-65%)
NEW SECTION 13.11: Exercises (~200 words)
- Sentiment decay curve fitting
- False positive analysis (precision/recall)
- Multi-source aggregation implementation
- Pump-and-dump detection classifier
- AP hack simulation (would multi-source have prevented?)
NEW SECTION 13.12: References (Expanded)
- SEC cases (James Craig, influencer scheme, Musk settlement)
- Academic (Tetlock 2007, Loughran-McDonald 2011, FinBERT)
- Practitioner guides
DIAGRAMS ADDED:
- AP Twitter hack timeline (detailed 120-second collapse)
PEDAGOGICAL APPROACH:
- Disaster-driven learning (AP hack, Musk, bank desk, pump-and-dump)
- Production-ready verification system (300 lines OVSM)
- Real examples with numbers (70% FP rate, $136B loss)
- Mathematical insight (3 sources → 2.7% FP vs. 30% single-source)
- Cross-chapter references (Tetlock 2007, overfitting from Ch 9)
KEY THEMES:
- Sentiment without verification = gambling
- 3+ source requirement (non-negotiable)
- False positives are THE problem (70% → unusable)
- Speed vs. truth tradeoff (200ms faster = $136B loss)
- Academic metrics don't equal profit (bid-ask spread reality)
STATUS: Chapter 13 production-ready with comprehensive disaster analysis1 parent d5663a6 commit fec795e
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