What Drives The Cnn Fear and Greed Index? An Analysis of Seven Sentiment Indicators

The CNN Fear and Greed Index is a market sentiment index made up of seven indicators. In this paper, we analyse the predictive power of each of these seven indicators on US equity index returns. Using Vector Autoregression and Granger Causality Tests, we find that Safe Haven Demand and the Put/Call Ratio Granger cause S&P 500 Returns. There is no predictive power associated with the remaining indicators.