StockGeist.ai is the ideal platform for you to understand investor sentiment in just a few clicks.
StockGeist.ai enables its users to view various market sentiment indicators in real time as well as the historic sentiment data of over 2200 trading companies, including those featured in the S&P 500 and NASDAQ 100 indices.
What is investor sentiment?
Investor sentiment, otherwise known as market sentiment, refers to the general outlook or attitude of traders and investors toward a particular stock or the overall financial market.
Analysis of investor sentiment provides short term investors and day traders with the tools necessary to understand the crowd's feelings towards a stock, and can in some cases help predetermine price movements on the market, especially when the price alterations appear contradictory to the fundamentals.
If traders expect upward price movement in the stock market, the sentiment is said to be bullish. However, if traders expect a downward movement in the stock market, the sentiment is known to be bearish.
For a deeper understanding, please visit our bullish vs bearish sentiment page.
What factors affect investor sentiment?
The psychological state of investors and traders towards a particular stock or the market in general is typically an accumulation of a variety of technical and fundamental factors including:
- Economic reports
- Price history
- Seasonal factors
- National events
- Global events
It is important to note that investor sentiment has a limited lifespan and you cannot pinpoint exactly when it will change ahead of time. A spike in sentiment data can last any given amount of time; anything from a matter of minutes or several weeks.
Why is investor sentiment analysis important for traders?
Investor sentiment analysis is highly regarded by many to be an important factor in predetermining stock price fluctuations.
It is crucial to be able to quickly decipher the mood of the market, but this can be a problematic and troublesome task if you are basing the overall sentiment analysis off a handful of messages on your favourite social media platform.
The actions and emotions of traders are not always driven by reason and logic. Market sentiment indicators prove to be invaluable to investors as an investment tool due to the irrationality of traders, whose corresponding messages to fundamental changes are not necessarily in proportion to the initial movement.
Don’t just take our word for it…
There has been plenty of scientific research into this area of trading for numerous decades. The literature acknowledges five main approaches to measuring investor sentiment: financial market-based measures, non-economic factors, survey-based sentiment indexes, textual sentiment data from online resources, and internet search behaviors.
Below are two examples of scientific papers that have found investor sentiment analysis to be a useful tool in a traders arsenal:
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Does investor sentiment really matter? (Chau, Deesomsak, and Koutmos, 2016) - “Our findings support the notion that sentiment-induced buying and selling is an important determinant of stock price variation.”
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How does investor sentiment affect stock market crises? (Zouaoui and Nouyrigat, 2011) - “We find that investor sentiment increases the probability of occurence of stock market crises within a one-year horizon. The impact of investor sentiment on stock markets is more pronounced in countries that are culturally more prone to herd-like bheavior, overreaction and low institutional involvement.”
Investor sentiment analysis is valued across the industry, so much so that the American Association of Individual Investors (AAII) runs The AAII Investor Sentiment Survey on a weekly basis.
Individuals are asked for their thoughts on where they believe the market is heading across the next six months. The AAII has been carrying out this practice since 1987, an early indicator into the popularity of market psychology.
The survey results are presented in a ‘bull-bear spread’ with ranging scores classified into three categories; bullish, neutral, bearish.
For simple reference, on the StockGeist.ai platform, ‘bullish’ is represented as positive and ‘bearish’ is represented as negative. For traders and investors at the beginning of their cycle this can avoid any unnecessary confusion.
How can StockGeist.ai help with investor sentiment analysis?
As previously mentioned, basing the overall sentiment judgement off a couple mentions you see on your go to social media platform is far from ideal. StockGeist.ai’s market sentiment monitoring platform provides the perfect solution…
With just a few clicks you can view the up-to-date sentiment of any given stock in a clear and easy way to understand. We use AI-driven methods to analyse textual information of all social media messages related to a given stock and report these as positive or negative data points.
Our team of developers at StockGeist.ai are constantly evolving the platform's capabilities, whether that be in the form of API for full integration into your website, or new and updated features on the dashboard itself.
We provide our users with a range of features to view sentiment data of their chosen stock including:
Sentiment: Users can see the distribution of messages based on their positivity/negativity, as well as, grouping these into two classes as being either informative or emotional.
Ranking: Thousands of opinions are shared every minute online and we use this data to create a ranking system to show which stocks are receiving the most attention at that moment in time.
News: Save yourself the time of crawling through countless websites to find news articles related to the stocks you’re interested in by viewing all of the latest releases on our platform.
Wordcloud: Completely unfiltered, all of the trending words related to social media mentions. The quickest way to understand the mindset of investors and traders.
Read more about all of the stock sentiment features mentioned above plus watchlist charts, stock overview and fundamentals.
Investor Sentiment Effectiveness - Case Study Analysis
Above, we referred to published academic research showcasing the effectiveness of analyzing investor sentiment, but what about real case study examples using data from the StockGeist.ai platform itself…
The following examples include results from the analysis of NIO Inc’s stock for the week commencing 2nd August 2021, as well as T-Mobile USA's stock for 1st-10th September 2021.
Each case study replicated the same methodology to ascertain results. This methodology included establishing thresholds to determine whether each hour-long period has a ‘large’ amount of positive or negative messages. A percentage was calculated to determine how often the value of the stock would fluctuate under the noted threshold. The average hourly price change for that threshold was also calculated, by subtracting the opening price from the closing price.
Nio Inc.
- Indication of correlation between the relative number of positive/negative messages and the value of the stock.
- Stronger correlation with negative messages.
- Clear correlation of sentiment data from emotional messages and the average fluctuation of share price.
T-Mobile
- Indication of correlation between the relative number of positive/negative messages and the value of the stock.
- Stronger correlation with negative messages.
- Negative emotional messages displayed a clear correlation with the average fluctuation of share price.
Please visit our Nio Inc case study as well as our T-Mobile analysis for greater information on the processes involved and the results obtained.
It is important to note that investor sentiment analysis should be used in conjunction with other means such as fundamental analysis of the price/earnings ratio. However, with the current age of online platforms such as twitter and reddit encapsulating how new developments can spread like wildfire, there is evidence that social media is playing a heightened role within the stock market. Partnering this with the popularity of recreational trending, being able to stay up to date with the volatile crowd psychology can place day traders and investors in a strong position when making decisions.
Ensure you are best placed by signing up to StockGeist.ai’s innovative platform below. Alternatively, integrate our innovative tool into your very own project courtesy of our stock news sentiment API.
