(Original post can be found here)
But should you be buying into this optimism, or is this a extreme bullishness a contrarian signal?
The Significance of Herd Behavior and Extreme Investor Sentiment
Overwhelming consensus on a company can drive stock prices beyond their true fundamental value--understating or overstating inherent risks. These mispricings often present an opportunity for investors willing to go against conventional wisdom.
This is the goal of Contextuall: to identify examples where herd behavior has reached extreme levels.
We believe that, by identifying these areas of one-sided sentiment, investors could use these contrarian signals as a starting point for their own research.
Analyzing Media Sentiment for NICE Systems Ltd. (NICE)
3.90% of headlines have been classified as Negative (vs. an industry average of 12.54%).
Considering the academic research on investor herd behavior, is this extreme optimism a potential sell signal? Have investors become too bullish?
What do you think? Let us know in the comment section.