More than just feelings

Behavioral economics has already established the dictum that sentiment, emotions, even irrational convictions affect our decisions about how we spend.

- ANTONIO SAMSON

So, it is not always profit-maximization and data-driven rational judgments that come into play with purchasing decisions.

Does investment too get affected by feelings? "Market sentiment" is a phrase securities analysts use to explain price fluctuations that economic statistics and financial ratios alone cannot account for. Investor mood is described as bearish, bullish or that in-between gray area when investors are not paying attention and staying on the sidelines to "wait and see."

This investment mood is not entirely psychological as it is also driven by statistics on growth, inflation and exchange rate, in addition to a brew of insider info, corporate rumors, feng shui and foreign news.

Tracking business news and blogs with their parade of analysts going through statistics and foreign markets can set the mood, even when analysts do not always agree with one another. What the investor is looking for is somebody who agrees with her to justify her moves in the market. Most consumers of news and analysis go to an "echo chamber" of like-minded pundits.