S&P 500 Twitter Sentiment Index Series
What does everyone think about the market? Twitter will measure that for you. After retail investors and the so-called meme stocks invaded the market, promoting favored companies on social media and sending the share values of those companies skyward despite institutional investors betting against them, Wall Street has realized it can no longer ignore what retail traders are saying about stocks on social media.
Among its social media peers, Twitter is considered the best gauge of real-time reactions and sentiment. Twitter has long crunched and sold relevant data to hedge funds and banks. Now, it is partnering with S&P Dow Jones Indices to make a similar offering, dubbed the S&P 500 Twitter Sentiment Index Series, available to the public writ large.
The S&P 500 Twitter Sentiment Index Series will index the Twitterverse’s opinion of publicly traded businesses.
The series includes the S&P 500 Twitter Sentiment Index which measures the performance of 200 S&P 500 constituents with the highest sentiment scores and the S&P 500 Twitter Sentiment Select Equal Weight Index which measures the equal-weighted performance of 50 S&P 500 constituents with the highest sentiment scores.
The S&P 500 Twitter Sentiment Index Series
The S&P Dow Jones Indices, the world’s leading index provider, has announced the launch of the S&P 500 Twitter Sentiment Index Series.
How does it work? Using the S&P 500® Index as its eligibility universe and a sentiment scoring model, Tweets containing a stock symbol “$cashtag”—like $AAPL or $WMT—will be collected, filtered for spam, analyzed for bearish or bullish statements, and assigned a sentiment score.
At launch, the S&P 500 Twitter Sentiment Index Series includes: • S&P 500 Twitter Sentiment Index. Measures the performance of 200 S&P 500 constituents with the highest sentiment scores. Index constituents are float-adjusted market capitalization (FMC) weighted, subject to a single constituent weight cap of 10%. • S&P 500 Twitter Sentiment Select Equal Weight Index. The index measures the equal-weighted performance of 50 S&P 500 constituents with the highest sentiment scores.
The indices measure sentiment daily through an analysis of Tweets containing “$cashtags” that reference the stock symbol of an S&P 500 company. Through the Twitter API, S&P Dow Jones Indices consumes these Tweets in real-time and screens them to determine an overall “z-score” measuring the level of positive sentiment surrounding each company. The scoring model is based on a training database which is used to determine the likelihood that particular words in a Tweet are positive or negative. Several filters are applied to eliminate spam Tweets. The indices rebalance at the beginning of each month with the top 200 companies by sentiment score being added to the S&P 500 Twitter Sentiment Index and the top 50 being added to the S&P 500 Twitter Sentiment Select Equal Weight Index.
Social media is impacting the way information is being conveyed to investors and the combination of S&P DJI’s 125 years of indexing experience with Twitter’s large, growing social media community data set will provide a compelling barometer for investors looking to capture market sentiment, noted Peter Roffman, Global Head of Innovation and Strategy, S&P Dow Jones Indices.
While pundits agree that Twitter is not real life, among its social media peers, Twitter is considered the best gauge of real-time reactions and sentiment. Indeed, Twitter has a highly engaged, diverse, and growing community of people who come to the platform every day to discuss financial topics, noted Jared Podnos, Strategic Market Development Lead at Twitter.
The S&P 500 Twitter Sentiment Index gives the finance community on Twitter a new and exciting way to see the impact of their conversations on a stock market index.
What would be the impact on the market?
The conversations taking place and opinions being shared on social media have an increasingly significant impact on markets. On Twitter, finance conversations in the US were up more than 26% in 2020 from 2019 according to Twitter internal data, signaling a growing community on the platform.
S&P Dow Jones Indices is the largest global resource for essential index-based concepts, data and research, and home to iconic financial market indicators, such as the S&P 500® and the Dow Jones Industrial Average®. The full methodology and fact sheets, including historical back-tested performance data, for the S&P 500 Twitter Sentiment Index Series can be found downloaded at www.spglobal.com/spdji