Margin Debt as a Stock Market Indicator

Posted in Sentiment Indicators

 

Does margin debt serve as an intermediate-term stock market sentiment indicator based on either momentum (with an increase/decrease in margin debt signaling a continuing stock market advance/decline) or reversion (with high/low margin debt signaling a pending reversal)? To investigate, we relate the behavior of NYSE end-of-month margin debt, published with a delay of about a month, with the monthly behavior of the the stock market (S&P 500 Index). Using end-of-month data for the period January 1959 through October 2014 (670 months), we find that: (more…)

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