Using the data from 4.4 million transactions in bank-issued warrants from the European Warrant Exchange, we compute an index of investor confidence and expectations. We show that retail investors are contrarian, that retail investor sentiment is an important part of the equity pricing process...

This citation by Robert Neal and Simon Wheatley from their 1998 article about investorsentiment offers several insights and paves the way for this first chapter by making thefollowing statements: First, the opinion of individual investors on the market isimportant. Second, they are often wrong....

Using a unique data set with 18.1 million transactions in bank-issued warrants from the European Warrant Exchange, we compute a retail investor sentiment index. We show that retail investors are contrarian, that retail investor sentiment is an important part of the equity pricing process and...