S&P and Twitter Team on Stock Index Based on Tweet Sentiment

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S&P Dow Jones Indices has teamed with Twitter on a new endeavor that will monitor tweets to score how social media denizens feel about publicly traded companies.

What Happened

The new S&P 500 Twitter Sentiment Index Series consists of two indices:

The S&P 500 Twitter Sentiment Index, which measures the performance of 200 S&P 500 constituents with the highest sentiment scores.

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 indices will monitor Twitter user sentiment daily by analyzing tweets containing $cashtags for a stock symbol; In Twitter’s case, $TWTR. S&P Dow Jones Indices will absorb these tweets in real-time through Twitter’s API in order to determine an overall “z-score” measuring the level of positive sentiment surrounding each company. The indices will rebalance at the beginning of each month.

The companies noted that their scoring model is based on a training database that determines if particular words in a tweet are positive or negative. To ensure accuracy, several filters will be used to block spam tweets.

Why It Happened

In announcing the new series, the companies said U.S.-based finance conversations on Twitter were up by more than 26 percent from 2019 to 2020.

Peter Roffman, global head of innovation and strategy at S&P Dow Jones Indices, observed, “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.”

By Phil Hall

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