In recent months many press stories have covered the topic of how Twitter tweets possibly could influence the prices of stocks or the direction of the economy. News reports indicate that there are hundreds of millions of tweets posted per day. One challenging question for investors could be – can useful actionable information be gleaned from Twitter postings to identify stocks that have positive bullish sentiment?
One tool that has potential to be useful to investors is the CBOE-SMA Large Cap Index (SMLC Index). Percentage changes in stock price indexes from year-end 2014 through February 6, 2017 are up 42% for the SMLC Index, up 11% for the S&P 500® (SPX) Index, and down 3% for the MSCI Emerging Markets Index (MXEF).
In August 2016 CBOE announced it launched the SMLC Index, the first of a series of sentiment-based strategy benchmark indexes that measure short-term market momentum based on Social Market Analytics’ (SMA) social media metrics. Chicago-based SMA is a leading provider of actionable intelligence from social media sources. The SMLC Index is designed to track the performance of a hypothetical strategy that on a daily basis buys an equally weighted portfolio of 25 stocks with high SMA S-Scores. S-Scores, extracted from Twitter traffic by SMA algorithms, reflect investors’ sentiment about stocks and are believed to be predictive market signals. The SMLC Index stock portfolio is constituted daily at 8:30 a.m. CT from CBOE’s Large-Cap Universe on the basis of SMA S-Scores at 8:10 a.m. CT. Stocks in CBOE’s Large-Cap Universe are in the top 15 percent capitalization tranche of underlying shares for options listed on CBOE (approximately 3,000 stocks) and have market capitalizations that are greater than or equal to $10 billion. The SMLC Index is calculated by CBOE each business day at 3:00 p.m. CT. The hypothetical value of the index is held in cash until 8:30 a.m. CT the following business day, when it is reinvested in the next SMLC portfolio.
DISCUSSION AT CBOE RMC ON MARCH 10 IN CALIFORNIA
On March 10 at the three-day CBOE Risk Management Conference in Dana Point, California, there will be a discussion of the topics below –
The Growing Role of Predictive Analytics in Investing
- Relationships between political/policy shocks and financial markets
- Predictive signals from Twitter traffic
- Signals from implied volatility measures
- Moderator: Angela Miles, President, Miles Ahead Productions, LLC. Business First AM
- Joe Gits, CFA CEO and Co-Founder, Social Market Analytics (SMA)
- William Speth, Vice President, Research and Product Development, CBOE
- Eric Zitzewitz, Professor of Economics, Dartmouth College
To register for the 33rd Annual CBOE Risk Management Conference (RMC), please visit www.cboermc.com.
For additional information about the SMLC Index, please see www.cboe.com/SMLC.
For additional information about options on the S&P 500 (SPX) Index, and the MSCI Emerging Markets Index (MXEF), please visit www.cboe.com/SPX and www.cboe.com/MSCI.