Twitter Sentiment for Long-Term Trading: A Momentum Strategy

TL;DR: Context Analytics' S-Factor Twitter sentiment data, typically used for daily trading, can be aggregated into a powerful long-term signal. By measuring 6-month sentiment momentum (current 6 months vs. previous 6 months), securities with the strongest sentiment acceleration (top decile) outperformed those with weakest sentiment (bottom decile) by 4.5% annually over 10 years. The relationship between sentiment momentum and returns was near-monotonic across all deciles with improved Sharpe and Sortino ratios. This proves daily sentiment data can be feature-engineered into effective monthly investment signals—capturing narrative-building feedback loops before they fully materialize in price.