Relative sentiment is a factor that measures the differences in positioning, flows, and attitudes between institutional and individual investors. The rationale behind relative sentiment is that an increasing volume of literature shows institutions tend to have better financial market outcomes than individuals–a dynamic likely driven by the persistent structural advantages institutions possess.
At Relative Sentiment Technologies, we seek capital appreciation by dynamically adjusting our allocations based on the degree to which institutional investors are more or less bullish on a given asset class relative to retail investors–taking more exposure when institutions increase their relative bullishness, and less otherwise.