Is the AAII Sentiment Survey a Contrarian Indicator?
Each week, we ask AAII members a simple question: Do they feel the direction of the stock market over the next six months will be up (bullish), no change (neutral) or down (bearish)?
We refer to this question as the AAII Sentiment Survey. Since we started polling our members in 1987, our survey has provided insight into the moods of individual investors.
The survey has been become a widely followed measure. Its results are circulated by various organizations and media outlets, including Barron’s and Bloomberg. I have heard directly from, and indirectly of, many market strategists, investment newsletter writers and other financial professionals who follow the survey.
Can the results signal future market direction? In an update to my colleague Wayne Thorp’s 2004 article, “Investor Sentiment as a Contrarian Indicator” (Computerized Investing, September 2004), I look at the data and give perspective. The key to remember when reviewing the data is that a variety of indicators and criteria should be considered before making a tactical change in asset allocation.
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