Definition
The term market sentiment is used to describe the prevailing attitude of investors towards a financial market or individual security. Market sentiment develops over time, and is based on a large body of information including both fundamental and technical factors.
Explanation
Also known as investor sentiment, market sentiment is a common mindset towards a financial market or individual security that drives its value in a given direction. The most common examples of this attitude include a bullish sentiment, which drives prices upward, and a bearish sentiment, which drives prices down.
Generally, market sentiment develops over time as participants absorb all of the available performance information. While there are a number of ways to measure market sentiment, the most common metric is the number of advancing versus declining stocks.
Contrarian investors will take positions that oppose the general market sentiment. For example, if the market is experiencing a sell off, contrarians would begin buying securities.
Related Terms
The term dead cat bounce refers to a temporary increase in a financial market, or individual security, after a sustained decline. Oftentimes, the phrase dead cat bounce refers to the temporary recovery of a security deemed to be of low quality.
Moneyzine EditorNovember 6th, 2024
The term bull market refers to a period of time during which there is an increase in the value of equities traded on a stock market. There is no widely accepted definition of a bull market in terms of duration or magnitude of the increase.Moneyzine EditorNovember 6th, 2024
The term bear market refers to an extended period of time during which there is a decline in the value of equities traded on a stock market. While there is no strict definition, a decline of 20% or more in a market index would be considered a confirmation of a bear market.Moneyzine EditorNovember 6th, 2024
The term market correction refers to the downward movement of a financial market or individual security. A market correction is classified as a secondary trend, since they are usually short in duration.Moneyzine EditorNovember 6th, 2024
The term market trend is used to describe the upward or downward movement of a financial market over time. Market trends fall into one of three classifications: secular, primary, and secondary.Moneyzine EditorSeptember 20th, 2023
