“Twitter is not real life.” At least, that’s become the prevailing sentiment of pundits, politicians, analysts, and everyone else tired of the Blue Bird’s endless supply of snark, outrage, and sophistry.
That makes it the perfect place to take the pulse of the financial markets, no?
Yes, because among its social media peers, Twitter is considered the best gauge of real-time reactions and sentiment. Now, thanks to a partnership with S&P Dow Jones Indices, it is introducing a tool to index the Twitterverse’s opinion of publicly traded businesses, the company announced on Thursday.
So-called “meme stocks” and r/WallStreetBets set the stock market and social media on a bombastic collision course earlier this year. But expect Twitter’s new tool to be slightly more, shall we say, buttoned-up. Twitter has long crunched and sold relevant data to hedge funds and banks. Now, it will make a similar offering, dubbed the S&P 500 Twitter Sentiment Index Series, available to the public writ large.
Here’s how it works:
- 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.
- One index will track 200 S&P 500 constituents with the highest sentiment scores, weighted by float-adjusted market cap. Another will track the equal-weighted performance of the 50 highest scoring constituents.
So rest assured, the next time Elon Musk tweets about Tesla stock, Twitter’s new index will be sure to know.
Sentimental Journey: “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,” says Peter Roffman, S&P Dow Jones Indices global head of innovation and strategy. One thing he’s certainly right about: Twitter’s finance community is growing. According to Twitter’s internal data, finance conversations jumped 26% in 2020.