So where do most of the events fall? As Solt andStatman(1998) showed, event combinations are evenly distributed across the diagonal and off-diagonal cells in table 6-1. This is why the sentiment index is useless as aforecasting tool. Recall thatMichael Burke, editor of Investors Intelligence, is alleged to have said that Solt and Statman used tine data arbitrarily. But to avoid succumbing to the illusion of validity, they followed the general procedure prescribed by Einhorn and Hogarth.
Table 6-1