Sentiment, from Victor Niederhoffer

July 31, 2012 |

Are there any events these days that make people inordinately happy or sad. Perhaps these would influence the market? An event like an earthquake or a mass tragedy in a theater would seem to qualify. Perhaps there are classes of events that effect particular groups like flexions that cause them to be happy or sad that have a measurable effect also, like intervention by the EC, or the Fed. What do you think? Is it worth quantifying?

Rocky Humbert comments:

Yes, there are such events. Flying a Boeing 767 into a tall office building is one such example.

Scott Brooks writes:

Not sure this is an event, but…..the realization that massive fraud is occurring. For instance:

The Accounting debacle (i.e. Arthur Anderson, Enron, Worldcom, Global Crossing, etc.) of 2001.

The Mortgage Fraud Debacle of 2008.

Jordan Neuman writes:

The 2003 rally began with the freeing of Elizabeth Smart. Certainly the market was sold out, but I thought a collective sense of gratefulness served as a catalyst. But file this one under the difficulty of setting up the study.

Craig Mee writes:

Potentially state dinners and the like, when the flexions are busy cleaning their shoes and are getting ready for another free meal. Maybe that's why silly season (late Nov through December) appears to do ok. Plenty of back slapping, industry awards and the like. Also maybe Oscars week (or award month) is a winning combo for listed movie stocks.

Jim Sogi adds:

Here's a couple of ideas. Use facial recognition software to detect a "smile" tune in all the security camera in the world, process for correlation. It's a bit big brother-ish, but there are cameras all over in cities now around the world.

How about using beer sales? Old Chinese proverb: If you want to be happy for two hours, drink wine; if you want to be happy for two years fall in love. If you want to be happy forever, take up gardening.

Track marriages.

Track gardening sales, or farming yields. It's said one of the few real producers of wealth is farming. Good weather=good farm yield=good production=happy markets.

Comments

2 Comments so far

Wade on July 31, 2012 10:09 pm
Thinking that there are serious events that can affect national psyche in the medium term. However, these feelings, by themselves, should not affect equities (at least not for long). This assumes that investors are natural arbitrageurs. So, as long as the event itself does not cause a fundamental change in economic structure (aggregate demand, savings rate, national wealth), the broader stock market should remain resilient.

However, if the economic structure does change, or is at least challenged (like in 2008/2009), an outside force (like a central bank) must act in order for risk assets to catch a bid by an impaired investor class wary to participate in a “new landscape.”
admin on August 1, 2012 12:26 pm
wade. that’s a most economic analysis. the kind they’d like at rochester or chicago economics dept. if they werent on a board of some flexionic hedge fund or other. the real problem with sentiment is that it is pretty m uch idempotent with the previous move in stock prices. the kind of sent change i’m talking about is the kind that changes the playing field. vic

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