Fear and Greed Index

Fear and Greed Index – The Fear and Greed Index was developed by CNN Business to measure the impact of emotions on investor behavior and the overall sentiment in the stock market. It is based on the principle that extreme emotions drive market movements: Fear: Excessive fear can lead investors to sell stocks, causing a decline in stock prices. Greed: Excessive greed can lead investors to buy stocks aggressively, driving prices higher. The index aggregates multiple indicators, such as stock price momentum, market volatility, and trading volume, and is calculated on daily, weekly, monthly, and yearly bases. Investors and analysts use this index as a contrarian indicator, helping to identify potential market corrections or buying opportunities.

Example: If the Fear and Greed Index shows extreme fear, it may signal undervaluation in the market and potential buying opportunities, while extreme greed may suggest an overheated market prone to corrections