Title: The investor sentiment endurance index and its forecasting ability

Authors: Ling T. He

Addresses: Department of Economics and Finance, University of Central Arkansas, Conway, AR 72035, USA

Abstract: Based on a binomial probability distribution model, this paper creates an investor sentiment endurance index which estimates the probability that the high or low stock market price equals the closing price of a trading session. Results of this study indicate that the index has decent forecasting ability. The overall accuracy of eight-quarter rolling forecasts reaches 44.15%. Therefore, the true forecasting model and accuracy ratio developed in this study provide financial professionals with additional analytical tools.

Keywords: investor sentiment endurance index; forecasting ability; rolling forecasts; accuracy ratio; binomial probability distribution; modelling; stock market prices; closing prices.

DOI: 10.1504/IJFMD.2012.053339

International Journal of Financial Markets and Derivatives, 2012 Vol.3 No.1, pp.61 - 70

Received: 20 Nov 2012
Accepted: 28 Jan 2013
Published online: 30 Aug 2014 *

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