What is a fear and greed index?

A fear and greed index helps gauge stock market movements and whether stocks are priced fairly. The index is based on the logic that excessive fear drives down share prices, and too much greed has the opposite effect. CNN Business developed an index to measure investor sentiment in the stock market.

What does a high level of greed mean?

In contrast, a high level of greed may indicate that investors are confident in the market and are more likely to buy stocks. It is based on the idea that extreme fear can push share prices far below their intrinsic values, whereas extreme greed could push stock prices far above their value.

Why did 'greed' surge into the marketplace?

Greed surged into the marketplace on the misplaced belief that new Internet-based technology would fundamentally shift the market dynamics and business models of the future. Technology became fashionable, and “Bricks and Mortar” businesses were perceived as outdated and almost worthless.

What is the index and how does it work?

The index tracks how much the individual indicators deviate from their averages compared to how much they normally diverge. The index gives each indicator equal weighting in calculating a score from 0 to 100, with 100 representing maximum greediness and 0 signaling maximum fear. 1.