Capitalist Review

Financial Products Reviewed

‘Twitter’ ETF: An ETF Based On Social Sentiment?

October 19, 2015 by CapitalistReview Leave a Comment

With the continuing creation of smart-beta ETFs, it is probably only a matter of time before an ETF based on social sentiment will be produced. This may soon be the case: ETF.com reported that Market Prophit is seeking a ETF issuer to make an ETF based on its Market Prophit Social Media Sentiment Index. This index, with the Bloomberg symbol CROWD, is tracking long/short sentiment on Twitter. The index holds 25 components with a market cap above USD 1 billion and has a quarterly revision, though there’s a daily rebalancing. Year-to-date, the index is up 7% compared to a loss of 1.5% for the S&P 500 (data 15 Oct). So is this CROWD ETF an interesting investment proposition?

‘Twitter’ ETF: An ETF based on social sentiment?

Let’s first look at the basic premise. The creator Market Prophit says the index is leveraging the concept ‘Wisdom of Crowds’. This concept states that a diverse group of people, the crowd, knows more than one person or even can provide a more accurate version of the truth. In a translation to today’s world, Market Prophit sees the pulse from social media users, the crowd, as a pure measure of public sentiment on stocks. There may be some valid points here, but this line of thought misses the essential point of market prices. Prices are nothing more than the equilibrium of demand and supply. As a measure of supply and demand, price is already reflecting the wisdom of the crowd.

Market Prophit follows 220,000 Twitter-users with tweets featuring the ‘cashtag’, or $ followed by the ticker symbol. These 220,000 users are called ‘Market Prophits’. Not everyone who tweets a cashtag automatically gets selected in the crowd. The tweets should be in English and have a clear description. Also the quantity of tweets matters in the selection process. But in an interview with ETF.com, Market Prophit CEO Igor Conta said CROWD’s underlying algorithms filter smart from dumb money. This is an interesting concept, since a ‘wiser’ crowd will remain.

However, restricting the ‘Wisdom of the crowd’ to Twitter users is remarkable. There are a number of other social media investing platforms. Take for instance Stocktwits.com, which also offers an endless stream of stock related tweets. Or the research platform Seeking Alpha, where everyone can contribute, however contributions are screened on quality of arguments. Nevertheless, this platform thrives on interaction and dialogue of its users, and would arguably be a good fit in the crowd.

One potential problem lies in the daily rebalancing. To have an accurate sentiment-tracker, CROWD needs to rebalance long/short ideas at the end of each trading day. This is a disadvantage to large index trackers, which rebalance monthly or quarterly. The problem with rebalancing is that underlying shares have to be traded, causing transaction costs, borrowing cost to short etc. This has a huge impact on performance. CEO Conta downplays this issue, referring to tight bid/ask-spreads and the significant outperformance the index. Active traders know that high turnover certainly is an issue, so it will be interesting to see how much of CROWD’s outperformance will remain in real life trading.

The idea of following the wisdom of a certain group is not new. The Global X Guru Index ETF (GURU) tracks the 13F fillings of Hedge funds. This data is used to compile the ‘highest conviction’ ideas of Hedge Funds. As shown in the graph below, GURU (blue line) shows an outperformance of the broader market, measured by S&P 500 Index (red line). However, based on a period since June 2012, the outperformance is only a bit more than 4%.

Concluding, the idea of a social media sentiment tracker is interesting. However, following the thesis of the wisdom of the crowd, restricting to ‘smart’ twitter-users may be too restrictive since a number of specialized social media platforms co-exist. In addition, the high turnover due to daily rebalancing is an issue. Nevertheless, if Market Prophit indeed succeeds in finding a partner, it will be very interesting to see whether it can proof the projected (out)performance.

Contents hide
1 Share this:
2 Related

Share this:

  • Click to share on Twitter (Opens in new window)
  • Click to share on Facebook (Opens in new window)

Related

Obama’s plan to leave Afghanistan did not survive contact with reality
Get Ready for the Next Wave of Economic Refugees – the French

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Popular Posts

  • Jet Blue Mastercard Activate and Review (Barclaycardus Activate Online)
    Jet Blue Mastercard Activate and Review (Barclaycardus Activate Online)
  • AmericanExpress.com Confirm Card (2022 AMEX Card Review)
    AmericanExpress.com Confirm Card (2022 AMEX Card Review)
  • www.homedepot.com/applynow With Reference Number (2022)
    www.homedepot.com/applynow With Reference Number (2022)
  • Best Buy Account Credit Card Login, Activation, & Review
    Best Buy Account Credit Card Login, Activation, & Review
  • GetMyOffer.CapitalOne.com - Card Application for 2022
    GetMyOffer.CapitalOne.com - Card Application for 2022
  • SunTrust.com Activate MyCard: FAQ, Reviews, Customer Service
    SunTrust.com Activate MyCard: FAQ, Reviews, Customer Service
  • My Instant Offer Code (Apply Lending Club Personal Loan)
    My Instant Offer Code (Apply Lending Club Personal Loan)
  • www.mercurycards.com/activate - Login to Activate Your Mercury Mastercard
    www.mercurycards.com/activate - Login to Activate Your Mercury Mastercard
  • Credit One Increase Credit Limit Request (How Often Does Credit One Give Increases)
    Credit One Increase Credit Limit Request (How Often Does Credit One Give Increases)
  • www.WellsFargo.com/ActivateCard - How Do You Activate Wells Fargo Credit Card
    www.WellsFargo.com/ActivateCard - How Do You Activate Wells Fargo Credit Card




Pages

  • About Capitalist Review
  • Affiliate Policy
  • Capitalist Review
  • CapitalistReview Merch
  • CapitalistReview Privacy Policy
  • CapitalistReview Terms of Use
  • CapitalistReview.com
  • Contact
  • Sponsored, Guest Post, and Advertising

Categories

  • Credit Cards
  • Investing
  • Banking
  • Loans
  • Mortgage
  • Capital One Credit Card
  • SoFi Student Loans

Recent Posts

  • GetMyOffer.CapitalOne.com – Card Application for 2022
  • OpenSkyCC.com/Activate: MyAccount Online Account Activation
  • Exxon Mobil Credit Card Login, Application, & Review
  • Can You Use a Walmart Credit Card at Sam’s Club? (FAQ)
  • Chase Southwest Credit Card Application Status (Chase 2022)

Navigation

Capitalist Review Sitemap

Contact Us

Popular

Jetbluemastercard.com/Activate

mercurycards.com/activate

www.barclaysus.com/activate

Recent Posts

  • GetMyOffer.CapitalOne.com – Card Application for 2022
  • OpenSkyCC.com/Activate: MyAccount Online Account Activation
  • Exxon Mobil Credit Card Login, Application, & Review
  • Can You Use a Walmart Credit Card at Sam’s Club? (FAQ)
  • Chase Southwest Credit Card Application Status (Chase 2022)

RSS Capitalist Review

  • GetMyOffer.CapitalOne.com – Card Application for 2022 May 24, 2022
    Get My Offer From Capital One (Quick Summary) A credit card offer from Capital One Almost always arrives by US Mail in the form of a promotional application Intended for consumers with a good to great credit score If you receive this offer you should be happy as you have a great credit score The […]
    CapitalistReview
  • OpenSkyCC.com/Activate: MyAccount Online Account Activation May 22, 2022
    Activate an OpenSky credit card online Simply rev up the old PC and head on over to www.openskycc.com/activate and follow the on-screen instructions. Activation will take about 5 minutes to complete. Please note in order to obtain the OpenSky credit card you must be 18 years of age or older and a legal resident of […]
    CapitalistReview
  • Exxon Mobil Credit Card Login, Application, & Review May 22, 2022
    Exxon Mobil Credit Card Login If you are an Exxon Mobil credit card customer and are looking to take your credit card online please visit citiretailservices.citibankonline.com and follow the on-screen prompts. You must provide an email address, Alternative site logins include exxonmobilcard.com login and https://citiretailservices.citibankonline.com. Please note you must be 18 years of age or […]
    CapitalistReview
  • Can You Use a Walmart Credit Card at Sam’s Club? (FAQ) May 22, 2022
    Can you use a Walmart credit card at Sam’s club? Walmart issues two credit cards: Walmart MasterCard and the Walmart Rewards Card. You must be 18 years of age or older and a legal resident of the United States. Both Walmart credit cards can be used at Sam’s Club. Visit walmart.capitalone.com to learn more about […]
    CapitalistReview
  • Chase Southwest Credit Card Application Status (Chase 2022) May 22, 2022
    Credit Card Application Status Chase The best way to check the status of a Chase Southwest Credit Card Application Status is by calling 1-(888) 338-2586 and press 0 repeatedly.   Check Your Credit Card Application Chase Online You can visit the Chase Southwest credit card homepage to learn more about the application process, how to […]
    CapitalistReview

You can trust the integrity of our balanced, independent financial advice provided by Capitaliat Review. CR may, however, receive compensation from the issuers of some products mentioned in these articles. Opinions, reviews, analysis, advice, and thoughts are the author’s alone and his/her alone only. This content has not been provided by, reviewed, approved or endorsed by any advertiser, unless otherwise noted.

pages

  • About Capitalist Review
  • Affiliate Policy
  • Best Credit Cards of 2016
  • Capitalist Review
  • CapitalistReview Merch
  • CapitalistReview Privacy Policy
  • CapitalistReview Terms of Use
  • CapitalistReview.com
  • Contact
  • IndigoCard.com Apply – Indigo Platinum MasterCard Review
  • Sofi.com/Refinance1: Pre-Selected Refinance Promotional Offer Worth It?
  • Sponsored, Guest Post, and Advertising
  • Student.DRBank.com/BigSavings – Refinance Student Loan with DRB?
  • www.Betterment.com/Start – 5 Reasons to Invest with Betterment
  • www.cashnetusa.com/approved – Prequalified Loan Offer
  • www.SaveWithProsper.com – Prosper Loan Review for Borrowers
  • www.sofi.com reviews – SoFi Review and Sign Up Bonus
  • www.trysofi.com – Student Loan Refinancing From SoFi Worth It?
  • www.upstart.com/myoffer – Upstart Loan Application
  • Best Credit Cards
  • Best Credit Cards For Foodies
  • Coronavirus Home Refi?

© 2016–2022 Capitalist Review