BEHAVIOURAL FINANCE - SECTION V- CHAPTER 38 - Sentiment Measures from External Data

1. Module - 57
Sentiment Measures
from External Data
CMT LEVEL - I

2. American Association of Individual Investors (AAII)
• The American Association of Individual Investors (AAII) is an investor
education organization. It is a membership-driven non-profit with local
chapters throughout the United States.
• AAII’s stated mission is to teach individuals to manage their own
portfolios and to beat the average S&P 500 returns while taking on
lower-than-average levels of risk.
• AAII disseminates its education materials largely through its website,
AAII.com.
• James Cloonan founded AAII in 1978 on the premise that a nonprofit
organization is best designed to deliver unbiased investment advice.

3. American Association of Individual Investors (AAII)

4. Investors Intelligence
• The Chartcraft Investors Intelligence Index is a common and widely
accepted means of ascertaining the balance of power between the
bulls and bears.
• In actuality, the Investors Intelligence sentiment index may refer to
one of several possible sentiment indicators, including an advisor
sentiment review and an insider activity review.
• These individual indexes are grouped according to representative
sectors of market participants.
• Advisor Sentiment
• The Sentiment Index Ranking
• Swings in the Index
• Academic Research

5. Investors Intelligence

6. Magazine Cover
• The Magazine cover indicator is a somewhat irreverent economic indicator,
though sometimes taken seriously by technical analysts, which says that the
cover story on the major business magazines, particularly BusinessWeek,
Forbes and Fortune in the United States is often a contrary indicator.
• A famous example is a 1979 cover of BusinessWeek titled "The Death of
Equities". The '70s had been a generally bad decade for the stock market
and at the time the article was written the Dow Jones Industrial Average
was at 800. However, 1979 roughly marked a turning point, and stocks
went on to enjoy a bull market for the better part of two decades.
• In 2016, Gregory Marks and Brent Donnelly of Citigroup looked at The
Economist and "selected 44 cover images from between 1998 and 2016 that
seemed to make an optimistic or pessimistic point." They found that impactful
covers with a strong visual bias tended to be contrarian 68% of the time after
1 year.

7. Mutual Funds Cash/Assets Ratio
• A mutual fund liquidity ratio is a ratio that compares the amount of
cash in a fund relative to its total assets.
• A mutual fund liquidity ratio is reported by mutual funds to provide
investors with insight on how much cash the fund is holding.
• The Investment Company Institute provides a monthly report on
mutual fund industry statistics, which includes information on the
mutual fund industry’s average mutual fund liquidity ratio.
• Generally, investors may follow mutual fund industry liquidity to get a
sense of money managers’ collective perspective on the market. Liquidity
ratios greater than 5% are expected to show some fear in the market’s
prospects for gains with a bearish outlook. Liquidity ratios below 5% tend
to show that money managers are more bullish on the markets and fully
deploying all cash.

8. Money Market Fund Assets
• A Money Market Fund Assets average maturity is less than 60 days
or less .
• Investors in Money Market Fund expects that their funds are safe.
• As investors sell equities in brokerage accounts and hold fund in
Money Market Fund
• When Asset or Funds increase in Money Market Fund consider that
investors are nervous.
• As other sentiment indicators , assets in Money Market Fund
provide a signal of isolations