This paper presents a unique test of the effectiveness of technical analysis in different sentiment environments by focusing on its usage by perhaps the most sophisticated and astute investors, namely hedge fund managers. We document that during high-sentiment periods, hedge funds using...

This paper studies the effectiveness of technical trading approaches in market environments of varying sentiment. Due to short-sale constraints, overpricing with high sentiment (i.e. relatively optimistic sentiment) is more prevalent compared to underpricing with low sentiment (i.e. relatively...