Market Prophit, a market-sentiment research firm, has launched an index constructed and managed based on daily analysis of what people are saying about various stocks on Twitter.

The Market Prophit Social Media Sentiment Index went live Monday, and the ultimate goal is to license it to an ETF provider, according to company founder and chief executive Igor Gonta.

“It’s a crowd-sourced index,” he said. “We know that people get emotional and that fear and greed fuel the market, but that sentiment has never been able to be captured as its own risk factor.”

The index is constructed by measuring sentiment on Twitter, which has 302 million active monthly users, over a three-month basis. From there, the 25 most-talked-about stocks from the S&P 500 Index are selected to represent the index for the next 90 days.

Once the index is established on a market-capitalization-weighted basis, Mr. Gonta said an algorithm is applied to daily sentiment for each stock in the index to determine long- or short-biased adjustments at the end of each trading day.

“It works because it’s based on a concept called the wisdom of the crowd,” he said. “It doesn’t even have to be a large group providing the chatter, as long as it’s a diverse group providing the chatter.”

On a back-tested basis, from July 2013 through last Friday, the index generated a gross cumulative return of 52%, which compares to a 36% gain for the S&P over the same period.

Todd Rosenbluth, director of mutual fund and ETF research at S&P Capital IQ, said the closest thing he can think of to the Market Prophit index is the $157 million Guggenheim Insider Sentiment ETF (NFO), which invests based on the insider buying and selling activity of corporate executives.

The 9-year-old ETF is up 3.7% since the start of the year, but it has had some very strong performance years, including a 36.1% gain in 2013 when the S&P gained 32.4%, a 26.8% gain in 2010 when the S&P gained 15%, and a 51% gain in 2009 when the S&P gained 26.5%.

“Sentiment is not a widely used way of putting together an index, and thus an ETF would be a novel approach,” Mr. Rosenbluth said.

The index is being promoted as a smart beta strategy, which fits a broad definition of mostly index strategies that are constructed or managed in ways other than just traditional market-cap weightings.

While there isn’t yet a licensing agreement in place to package the index as an ETF, Mr. Rosenbluth pointed out that all the moving parts could result in an expensive product when it is rolled out as an ETF.

“It sounds like it will be a lot more to run than a traditional index,” he said. “The daily turnover, presumably, would be high, because sentiment can change rapidly.”

Asked about whether the strategy could be easily manipulated by people trying to promote or degrade a specific security, Mr. Gonta said there are safeguards in place to look out for things such as multiple retweets or automated tweets.

“Twitter is a public platform, and anybody can post what they want, but we have systems in place to prevent any gaming,” he said. “But Twitter is also a self-correcting platform, where the crowd does a lot of self-policing.”