For all of those advisors who think that Twitter's role in financial markets is largely limited to the touting of meme stocks, crypto assets, and Elon Musk's latest musings, consider this: S&P Dow Jones Indices (S&P DJI) has launched two S&P 500 indexes based on positive tweets.
The S&P 500 Twitter Sentiment Index measures the performance of the 200 index constituents with the highest sentiment scores derived from tweets that use stock trading symbols as hashtags — the symbols are preceded with a dollar sign and known as cashtags. The weight of the 200 names is based on market capitalization.
The S&P 500 Twitter Sentiment Select Equal Weight Index measures the equal-weighted performance of the 50 index constituents with the highest sentiment score.
S&P DJI collects the tweets in real time, then screens them to determine an overall "z-score," which measures the level of positive sentiment for each company. Filters are applied to eliminate spam tweets. The indexes are published daily and rebalanced monthly, at the beginning of each month.
They reflect the growing use of Twitter in announcements and discussions around financial topics. Conversations about finance on Twitter rose more than 26% between 2019 and 2020 in the U.S., according to international Twitter data cited by S&P DJI. Those conversations, notes the S&P DJI press release, "have an increasingly significant impact on markets."
