S&P Dow Jones Indices (SPDJI) has launched the S&P 500 Twitter Sentiment index which rates companies based on the opinion of the Twitterverse.
Investors will be able to capture the sentiment of the social media platform through a scoring model that will measure bullish and bearish tweets containing the ‘$cashtags’, the stock unique stock symbol of S&P 500 stocks.
At launch, the index series will consist of the S&P 500 Twitter Sentiment index, measuring the performance of 200 companies with the highest sentiment scores. Constituents are float-adjusted market capitalisation weighted, with a single stock weight cap of 10%.
In addition, the S&P 500 Twitter Sentiment Equal Weight index will measure the equal weight performance of 50 S&P 500 constituents with the highest sentiment scores.
The indices will rebalance on a month-by-month basis.
References containing ‘$cashtags’ will be collected and screened in real-time to determine a ‘z-score’, measuring the level of positive sentiment surrounding the company.
The ‘z-score’ is based on a training database, that will determine whether words in the tweet are positive or negative, with a filter to exclude spam tweets.
Peter Roffman, global head of innovation and strategy at SPDJI, said: “Social media is impacting the way information is being conveyed to investors and the combination of SPDJI’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.”
According to Twitter, finance conversations on the platform grew by more than 26% in 2020 compared to 2019.
Jared Podnos, strategic market development lead at Twitter, added: “Twitter has a highly engaged, diverse, and growing community of people who come to the platform every day to discuss financial topics.”