New exchange-traded fund
The BUZZ ETF reflects the performance of the BUZZ NextGen AI index, whose portfolio of 75 US stocks is compiled by artificial intelligence algorithms based on "online chatter". Analysts predict its high popularity.
A new exchange-traded fund (ETF) formed by major New York investment firm VanEck, full name: ETF VanEck Vectors Social Sentiment (BUZZ), began trading on the NYSE on Thursday.
Exchange-traded ETFs are securities that most often reflect the performance of an index (a 'basket' of stocks) created by an investment company. ETFs are traded on the market like ordinary shares.
The VanEck Vectors Social Sentiment passively managed ETF features the BUZZ NextGen AI US Sentiment Leaders Index, which consists of 75 US stocks of companies with at least $5 billion in capitalization that show the most positive investor sentiment. Artificial intelligence algorithms are used to select BUZZ stocks, which analyse more than 15 million online posts a month from various media sources and social networks. The algorithms check whether a comment is positive, negative or neutral and then rank each stock based on the degree of positive sentiment and breadth of discussion.
With no stock exceeding 3% of the mass of the index, the selection of stocks changes every month.
According to documentation filed with the SEC, stocks in the BUZZ index had a weighted average market capitalisation of $297.2bn as of 31 January, meaning that the index probably consists of stocks from many of the big tech companies that contributed to the market's record growth last year.
Stock manipulation on social media
The global scandal about the manipulation of shares in GameStop and others on the advice of investors on the website Reddit has demonstrated the power of media and social media to influence the stock market.
That said, limiting the selection to companies with a market capitalisation of at least $5bn excludes stocks such as Gamestop, Express or AMC Entertainment, and helps reduce the potential for manipulation of the stocks that make up the index.