Harnessing Public Sentiment for Market Predictions

Positive expected value can be found in tracking the meme-ification of assets through social media polls, serving as contrarian indicators. By leveraging a large follower base, polls can reveal market sentiment regarding asset values, such as treasury yields. When participants vote more heavily for extreme outcomes, it can signal potential reversals. Historical data shows that following such signals can yield significant excess returns, indicating a high hit rate for predictions based on public sentiment. While anecdotal evidence is compelling, the challenge lies in systematizing these approaches to eliminate biases and cherry-picking, akin to the methodology employed with long-term backtesting of successful indicators, like the Economist cover strategy.