The Dreman Forecasting Model

The Dreman Forecasting Model is an investment strategy that uses investor psychology to predict market trends. It suggests that during rising markets, investors become overly optimistic, pushing stock prices higher than their true value. Conversely, in declining markets, pessimism causes prices to fall below actual worth. The model recommends buying stocks when pessimism is high (prices are below intrinsic value) and selling when optimism is excessive, aiming to capitalize on market overreactions. Essentially, it leverages behavioral patterns, like fear and greed, to identify better entry and exit points in investing.