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Measures of sentiment have been mixed.
To empirically examine this question, we integrate different measures of sentiment into a portfolio optimization procedure.
Hogwash, says Mike Norman, editor of the Economic Contrarian Update, a daily online service that looks at news headlines and other measures of sentiment and takes positions against the herd.
McMillan is a veteran technical analyst who utilizes price and volume trading patterns as well as measures of sentiment to formulate both bullish and bearish stock and option strategies.
Taking these criticisms of the index of Baker and Wurgler (2006) into account, Internet-based measures of sentiment could be attractive as well for our study: for example, Tetlock (2007) analyzes whether a 'pessimism factor' extracted from a column of the Wall Street Journal contains predictive power for market prices.
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The measure of sentiment increased by 2.7 points to 95.2.
What measure of sentiment do you prefer?
For completeness it is mentioned that the ANEW score for "arousal" and the IBM measure of sentiment are the most predictive of these four features.
For the first step, this requires finding a suitable measure of sentiment as a latent factor for the valuation of asset prices.
Here's one of the cons as I can see it: If part of Twitter's business model is based on the data users put into it — for example, offering it as a measure of sentiment analysis for brands, or for brands to prove how well their promotions travel through the Twittersphere — then services that encourage people to delete what they've tweeted runs directly counter to that.
Or do measures of consumer sentiment become unreliable predictors of actual economic behavior once we're this deep into an election cycle?
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Justyna Jupowicz-Kozak
CEO of Professional Science Editing for Scientists @ prosciediting.com