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Predicting Returns Using Behavioral Market Barometers

Published on May 1, 2023

The Journal of Investment Consulting | Volume 21, Number 1, 2022

Recipient of the 2023 Journal Research Award

The Journal Research Award honors the author(s) of an original article representing the best writing for the previous year, is germane to investment consulting and/or private wealth management, and was published in the Journal of Investment Consulting or the Retirement Management Journal.

The 2023 recipient is C. Thomas Howard, Ph.D., for his article, “Predicting Returns Using Behavioral Market Barometers,” which appeared in the Journal of Investment Consulting. Howard is Professor Emeritus at the Reiman School of Finance, Daniels College of Business, University of Denver and Chief Executive Officer and Chief Investment Officer at AthenaInvest, Inc.  Link to Announcement


This paper introduces market barometers that are based on measurable and persistent investor behavior. I test the ability of U.S. market, international market, and capitalization barometers to predict S&P 500, MSCI EAFE, and Russell 2000 returns, respectively. The empirical results for January 1981–December 2020 are statistically and economically significant and cannot be explained by trailing equity returns or the Institute of Supply Management Purchasing Managers’ Index,1 one of the best measures of economic activity. Barometers are used to develop a set of trading rules that show evidence of superior performance when compared with relevant benchmarks over the period evaluated.