Investopedia Anxiety Index


By
CALEB SILVERUpdated Jul 28, 2021
100.98
The current reading of the Investopedia Anxiety Index is neutral.
Markets Today
U.S. stock futures are wobbling between gains and losses Wednesday morning after the major indices broke a five-day winning streak yesterday. 
Advance data on trade in goods was released at 8:30 a.m., and showed a balance of -$91.2 billion, below the forecast of -$88 billion. More than 250 companies will report quarterly earnings today, including Facebook, PayPal and Pfizer
The Federal Reserve is wrapping up its two-day Federal Open Market Committee (FOMC) meeting today, and will give a statement at 2 p.m., followed by a press conference with Federal Reserve Chair Jerome Powell at 2:30 p.m. Treasury yields are higher ahead of those events; the 10-year note currently yields 1.268%. 
Oil futures are trading higher after the American Petroleum Institute said Tuesday that U.S. crude oil stocks fell 4.73 million barrels in the week ended July 23. The Energy Information Administration's weekly report on U.S. petroleum inventories is due at 10:30 a.m. 
European markets traded higher after consumer confidence in France declined from a reading of 103 to 101 amid signs of a rebound in COVID-19 cases, and after annual house price growth in the U.K. fell from 13.4% to 10.5% in July. Import prices in Germany rose 12.9% year-over-year in June, while the country's consumer climate indicator remained at -0.3 for August. Italy's manufacturing confidence indicator rose from 114.8 to 115.7 in July. 
Asian markets traded mostly lower after Japan's index of leading economic indicators dropped from 103.8 to 102.6 in May, and after its index of concurrent economic indicators dropped from 95.3 to 92.1. Australia's annual inflation rate rose from 1.1% to 3.8% in the second quarter. 
What the Index Shows
The Investopedia Anxiety Index (IAI) is a gauge of investor sentiment based on the behavior of tens of millions of Investopedia readers around the world. A reading of 100 is considered "neutral."
The IAI is driven by reader interest on Investopedia across three categories of topics: macroeconomic (such as inflation and deflation), negative market sentiment (such as short selling and volatility), and debt/credit (such as default, solvency, and bankruptcy).
Background
In 2012, Seth Steven-Davidowitz published an article in The New York Times explaining how he used Google search results to uncover voter bias that pollsters were unable to find.1 2 Investopedia has over 20 million monthly unique visitors, and with Steven-Davidowitz's work in mind, we asked ourselves, “What can the search behavior of our readers tell us about the state of markets and the economy?"
We have the data: more than 30,000 URLs of quality content going back before the collapse of Lehman Brothers and the 2008 financial crisis. I represented the editorial team and partnered with our lead data scientist Dr. Ronnie Jansson at the end of 2015 to search for patterns in our most highly trafficked materials. We carefully selected a selection of terms on topics that suggested investor fear, like "default," and opportunistic terms, like "short-selling."
Finding a signal in noisy web traffic data is difficult due the varied seasonality of our readership (for instance, traffic declines on the weekends) and exogenous factors like search engine results page (SERP) rank. We first needed to develop a methodology to remove this noise and produce an index that robustly tracks the actual ebb and flow of interest in the chosen topics.
When we looked at the results of the analysis the first time, we found that the major peaks in the index occurred exactly where they would make sense: around major events like the fall of Lehman Brothers (by far the most significant peak), the Greek debt crisis, and the U.S. credit downgrade by Standard and Poor’s.
In the final version of the IAI we used 12 definition pages, all with exceptionally high page view counts. We also now use several thousand more pages in the normalization procedure. In total we used close to one billion page views to produce the 10+ year monthly IAI plot.
We had set out to create a proxy or index for investor sentiment, but we needed an outside point of reference. The Chicago Board of Options Exchange’s Volatility Index (VIX), often referred to as "the fear index," is commonly used as a gauge of investor fear.3 We plotted the VIX next to our new creation, and the results spoke for themselves:
Over a period of almost a decade, the large scale features are very similar in the VIX and the IAI despite measuring different phenomena (stock market volatility and content consumption, respectively). It gets even more interesting when the two are overlaid on top of one another:
Perhaps the most compelling comparison is at the very earliest point of the plot. For more than a year prior to the peak of the financial crisis in September 2008, the IAI was profoundly elevated (around 120 or so – a level that had not occurred in a single month in the most recent four years), while the VIX remained subdued, around 20. In other words, based on the VIX alone you would be caught completely off guard by the biggest financial crisis of our generation, whereas the IAI was an alarm blaring for more than a year before the crisis hit.
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Related Terms
Fear and Greed Index
The fear and greed index was developed by CNNMoney to measure two of the primary emotions that influence how much investors are willing to pay for stocks. more
Cboe Volatility Index (VIX)
The Cboe Volatility Index, or VIX, is an index created by Cboe Global Markets, which shows the market's expectation of 30-day volatility. more
Monetize
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Volatility
Volatility measures how much the price of a security, derivative, or index fluctuates. more
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