S-Score

DEFINITION of 'S-Score'

A numerical value that encapsulates how consumers and investors feel about a company, stock, ETF, sector or index as expressed over social media, specifically Twitter. S-Scores are created with data gathered by social media monitoring engines to help investors make trades and to help companies with market analysis and decision making.

BREAKING DOWN 'S-Score'

In 2013, NYSE Technologies and Social Market Analytics created the first S-Score to be distributed over a high-performance global network, specifically geared toward the financial sector and designed to benefit trading firms, portfolio managers, hedge funds, risk managers and brokers. Along with its trademarked S-Score, SMA offers S-Mean, S-Delta, S-Volatility, S-Buzz and S-Dispersion indicators (together called S-Factors), to track the volume, change and dispersion of social media comments. Their system filters out irrelevant and duplicate comments and spam to focus on the 10% of comments that provide meaningful information.

An S-Score of greater than +2 is associated with significant positive sentiment, while an S-Score of lower than -2 is associated with significant negative sentiment. A score greater than +3 is considered extremely positive, while one below -3 is considered extremely negative. Anything between -1 and +1 is considered neutral. Higher scores could be also associated with higher Sharpe ratios, while lower scores could be associated with lower Sharpe ratios.

Investors can use S-Scores to help them pick stocks. When S-Score changes, stock price is expected to change as well. Research by Social Market Analytics has shown that stocks with S-Scores higher than +2 significantly outperformed the S&P 500 over the period December 2011 through December 2013, while those with S scores less than -2 underperformed it significantly. As of January 2014, SMA computed S-Scores for all U.S. stocks with a meaningful amount of social media data. Examples include Whole Foods, Tesla Motors, Apple and Luluemon.