Well this is difficult to test. I have one and I try six months with it up and then six months without. My dreams have been much more scary without it up. (scary in ways i cannot put here)
I think that if someone believes it helps with bad dreams (like me) then it will help. It is a mind over matter kind of thing.
However if it actually works besides that I do not know. From what I have experienced it has been having an effect. Perhaps it really is doing it or my mind thinks it is. Or maybe both, but there is still an effect.
My dream catcher is falling apart and is only two inches. I mounted it above my head when I sleep.