Trading on a World of Sentiment
Investors are consulting software that analyzes millions of online comments about companies to help them decide when to buyand sellstocks
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Dr. Richard Peterson, a psychiatrist by training, knows first-hand that emotions often rule investors. After the financial crash of 2008, he invested in stocks such as Citigroup (C), when others were selling. His now-closed MarketPsy Long-Short Fund went on to outperform the Standard & Poor's 500-stock index from September 2008 through the end of last year.
"In the end, 75 percent of the overall strategy was based on sentiment," says Peterson, managing partner of the fund's parent MarketPsych Capital. The fund, which began with $1 million, had a 28 percent return from Sept. 2, 2008, through Dec. 31, 2010. The S&P 500 lost 1.6 percent over the same period.