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The BusinessWeek/YouGov Optimism Index Explained

Posted by: Greg T. Spielberg on June 19

optimism.gif Over the past few weeks you may have noticed BusinessWeek/YouGov’s Optimism Index on our Case for Optimism page.

Our weekly index combines U.S. public opinion and forecasts from leading economic establishments. In the spirit of transparency, we want to make public the sources we use to build this proprietary index. We’re not going to divulge the algorithms we use to formulate the index (hey, Google doesn’t), but we do want to disclose where the data comes from:

* The Chicago Board Options Exchange (CBOE) Volatility Index, which displays the expected market volatility of the S&P 500 over the next 30 days. A higher expected volatility typically translates the pessimistic investing outlook. Not surprisingly, back in November the tumultuous index hit 80 — which market-watchers read as “No swimming!” Now, the index is down to 30, a benchmark that traditionally signifies smooth waters.

* Bloomberg’s GDP forecast for 2009 and 2010.

* Bloomberg’s prediction for unemployment rates in 2009 and 2010.

* To track the ever-shifting opinions of Americans, YouGov polls a representative sample of 1,000 citizens each week. From this survey, we use three questions:

“Overall, do you think the economy is getting better or worse?”

“If you lost your job, how hard would it be for you to find a new job that paid as much as you are making now?”

“Do you think the stock market will be higher or lower 12 months from now?”

As we’ve seen from comments on our site, readers enjoy armchair forecasting as well. Post a comment to weigh in on which direction you think the economy is heading. And let us know what you think of our index.

Thank you for your interest. This blog is no longer active.



BusinessWeek’s Joe Weber, Patricia O'Connell, Michelle Conlin, Frederik Balfour, Peter Coy, Greg Spielberg and Roger Crockett examine The Case for Optimism by looking past the financial turmoil and economic unrest gripping the globe to focus on the promising future that lies on the other side of this storm. We’ll chronicle the forward thinkers investing in R&D, launching promising new products, entering new markets, or implementing management and leadership.

See why BusinessWeek Editor-In-Chief Stephen J. Adler is optimistic about the economy amid the sharpest downturn since the Great Depression.

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