AAII net investor sentiment (percent bullish minus bearish) correlates weakly negatively with S&P 500 26-week future returns (-0.11; R-squared 0.01; July 1987–mid-July 2025; weekly data, in-sample), with the correlation near zero in the second half (-0.01) versus the first (-0.22).
Is conventional wisdom that aggregate retail investor sentiment is a contrary indicator of future stock market return correct? To investigate, we examine the sentiment expressed by members of the American Association of Individual Investors (AAII) via a weekly survey of members. This survey asks AAII members each week (Thursday through Wednesday): "Do you feel the direction of the market over the next six months will be up (bullish), no change (neutral) or down (bearish)?" Only one vote per member is accepted in each weekly voting period." Survey results are available the market day after the polling period. We define aggregate (net) investor sentiment as percent bullish minus percent bearish. Using outputs of the weekly AAII surveys and prior-day closes of the S&P 500 Index from July 1987 through mid-July 2025, we find that:
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