Some things I read in Jeremy Siegel's book yesterday :
10) If there is significant evidence that a sector has become overpriced relative to its fundamentals then alter. A warning sign is when a sector achieves a 30% or greater weight in S&P500 Index. Oil in 1980 and technology in 2000 are examples. Subsequent returns to both sectors were very poor.
13) Investor's Intelligence has published one of the long-standing indicators of investor sentiment. They have evaluated scores of newsletters determining if bullish, bearish or neutral.
When investor sentiment is lowest, the returns have ben highest. And when investor sentiment has been highest, worst returns in the market. Sentiment = bullish newsletters/bearish newsletters
Sentiment Return (70 thrugh 00)
0.2-0.3 Return = 20%
0.9-1.0 Return = -10%
14) It is of note that the volatility index (VIX) the measure of implied market volatility computed from option prices, spikes upward at virtually the same time that investor sentiment drops. Anxiety in the market which can be measured from the premiums on options prices, is strongly correlated with investor bearishness.
15) Another indicator of investor sentiment :
Whenever the recommended allocation to stocks falls below 50% by portfolio managers, returns in actuality have been high. (Richard Bernstein)
16) Out-of-favor stocks : Dogs of the Dow (Dow 10 strategy)
10) If there is significant evidence that a sector has become overpriced relative to its fundamentals then alter. A warning sign is when a sector achieves a 30% or greater weight in S&P500 Index. Oil in 1980 and technology in 2000 are examples. Subsequent returns to both sectors were very poor.
13) Investor's Intelligence has published one of the long-standing indicators of investor sentiment. They have evaluated scores of newsletters determining if bullish, bearish or neutral.
When investor sentiment is lowest, the returns have ben highest. And when investor sentiment has been highest, worst returns in the market. Sentiment = bullish newsletters/bearish newsletters
Sentiment Return (70 thrugh 00)
0.2-0.3 Return = 20%
0.9-1.0 Return = -10%
14) It is of note that the volatility index (VIX) the measure of implied market volatility computed from option prices, spikes upward at virtually the same time that investor sentiment drops. Anxiety in the market which can be measured from the premiums on options prices, is strongly correlated with investor bearishness.
15) Another indicator of investor sentiment :
Whenever the recommended allocation to stocks falls below 50% by portfolio managers, returns in actuality have been high. (Richard Bernstein)
16) Out-of-favor stocks : Dogs of the Dow (Dow 10 strategy)
