RT Journal Article SR Electronic T1 Sentiment and the Performance of Technical Indicators JF The Journal of Portfolio Management FD Institutional Investor Journals SP 112 OP 125 DO 10.3905/jpm.2017.43.3.112 VO 43 IS 3 A1 Shu Feng A1 Na Wang A1 Edward J. Zychowicz YR 2017 UL https://pm-research.com/content/43/3/112.abstract AB This article studies the effectiveness of technical trading approaches in market environments of varying sentiment. Because of short-sale constraints, overpricing with high sentiment (i.e., relatively optimistic sentiment) is more prevalent compared to underpricing with low sentiment (i.e., relatively pessimistic sentiment), and this effect is stronger on difficult-to-arbitrage securities. The authors find consistent evidence over the period from 1993 to 2010 that the examined set of technical indicators perform better during periods of high sentiment than during periods of low sentiment. Moreover, this sentiment effect is relatively more pronounced for small stocks. These findings hold after a number of robustness checks are applied, and they highlight the importance of incorporating the sentiment effect when using technical indicators.TOPIC: Technical analysis