Market Sentiment and an Overnight Anomaly

8 Pages Posted: 29 Oct 2021

Date Written: April 13, 2021

Abstract

Various research shows that market sentiment, also called investor sentiment, plays a role in market returns. Market sentiment refers to the general mood on the financial markets and investors' overall tendency to trade. The mood on the market is divided into two main types, bullish and bearish. Naturally, rising prices indicate bullish sentiment. On the other hand, falling prices indicate bearish sentiment. This paper shows various ways to measure market sentiment and its influence on returns.

Additionally, we take a look at an overnight anomaly in combination with three market sentiment indicators. We analyse the Brain Market sentiment indicator in addition to VIX and the short-term trend in SPY ETF. Our aim is not to build a trading system. Instead, it is to analyse financial markets behaviour. Overall the transaction costs of this kind of strategy would be very high. However, more appropriate than using this system on its own would be to use it as an overlay when deciding when to make trades.

Keywords: Market Sentiment, Overnight Anomaly

Suggested Citation

Vojtko, Radovan and Hanicova, Daniela, Market Sentiment and an Overnight Anomaly (April 13, 2021). Available at SSRN: https://ssrn.com/abstract=3829582 or http://dx.doi.org/10.2139/ssrn.3829582

Radovan Vojtko

Quantpedia.com ( email )

Dulovo namestie 14
Bratislava, 85110
Slovakia

HOME PAGE: http://www.quantpedia.com

Daniela Hanicova (Contact Author)

Quantpedia ( email )

Dulovo namestie 14
Bratislava, 85110
Slovakia

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