THE THEORY OF CONTRARY OPINION: A TEST USING SENTIMENT INDICES IN FUTURES MARKETS

The theory of contrary opinion predicts price reversals following extremes in market sentiment. This research tests a survey-based sentiment index's usefulness as a contrary indicator across 28 U.S. futures markets. Using rigorous time-series tests, the sentiment index displays only a sporadic and marginal ability to predict returns, and in those instances the pattern is one of return continuation--not reversals. Therefore, futures traders who rely solely upon sentiment indices as contrary indicators may be misguided.


Subject(s):
Issue Date:
2003
Publication Type:
Journal Article
PURL Identifier:
http://purl.umn.edu/14673
Published in:
Journal of Agribusiness, Volume 21, Number 1
Page range:
39-64
Total Pages:
26




 Record created 2017-04-01, last modified 2017-08-23

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