After studying this chapter, you should
Understand what is meant by the term “sentiment”
Understand the concept of contrary opinion
Be familiar with methods for measuring sentiment of uninformed and informed market players
“As a general rule, it is foolish to do just what other people are doing, because there are almost sure to be too many people doing the same thing.”—William Stanley Jevons (1835–1882), as quoted in Neill (1954)
The focus of this chapter is market sentiment. Market sentiment refers to the psychology or emotions of market participants. At times, investors are acting on feelings of fear and pessimism. At other times, hope, overconfidence, and greed characterize investor psychology. Investors react ...