An investor is “bullish” when they see upward stock trends managerial economics definition investopedia forex “bearish” when the market is going down. A bull uses its horns in an upward motion to attack and a bear uses its claws in a downward motion to attack. If investors expect upward price movement in the stock market, the sentiment is said to be bullish.
On the contrary, if the market sentiment is bearish, most investors expect downward price movement. Market sentiment is usually considered as a contrarian indicator: what most people expect is a good thing to bet against. Market sentiment is monitored with a variety of technical and statistical methods such as the number of advancing versus declining stocks and new highs versus new lows comparisons. A large share of overall movement of an individual stock has been attributed to market sentiment.
A particular thread of scientific literature connects results from behavioural finance, changes of investor attention on financial markets, and fundamental principles of asset pricing: Barberis et al. Many investors use indexes to gauge market sentiment. According to the first approach, investor attention can be approximated with particular financial market-based measures. All mentioned above market-based measures have a one important drawback. In particular, according to Da et al. Although market-based measures have the advantage of being readily available at a relatively high frequency, they have the disadvantage of being the equilibrium outcome of many economic forces other than investor sentiment.
Market sentiment can lead to stock crashes and large boom periods. The second way to proxy for investor attention can be to use survey-based sentiment indexes. In the 1920s, the market sentiment of railway companies was bullish as it was a new market, and investors saw long-term prospects. The fourth road is an important source of information about investor attention is the Internet search behavior of households. Publicly available data on search volumes for most Internet search services starts from the year 2004.
All boats float or sink with the tide. Finally the fifth source of investor attention can also depend on some non-economic factors. Additional indicators exist to measure the sentiment specifically on Forex markets. Sentiment: A Meaningful Shift For Stock Bulls?
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Rochester, NY: Social Science Research Network. All That Glitters: The Effect of Attention and News on the Buying Behavior of Individual and Institutional Investors”. The Sum of All FEARS Investor Sentiment and Asset Prices”. An Investor Expectations Stock Price Predictive Model Using Closed-End Fund Premiums on JSTOR”.