As can be seen in the table and graph below,
stock market advisors, who both shape the sentiment of investors in
general, are consistently wrong in their expectations of the
future direction of stock prices:
When the majority of advisors
believe the stock market is headed higher, stocks peak and
head lower; when
the majority expect lower prices, the stock market bottoms-out and
begins to climb.
Furthermore, the greater the consensus stock prices are headed
in a given direction, the more substantial will be the move in the
opposite, unexpected direction. Thus, stock market advisors, who
represent the sentiment of investors in general, consistently
form irrational expectations about the future direction of stock
prices such that one can profit from systematically investing contrary
to their advice.