Year: 2025
Type: article
Abstract: Investor sentiment significantly shapes stock market behavior, influencing asset prices, trading activity, market risk, and portfolio allocation. This review synthesizes conceptual frameworks, empirical evidence, and mechanisms through which sentiment affects financial markets, covering both developed and emerging markets. Direct and indirect sentiment measures, including surveys, market-based indicators, and text-based analyses, are evaluated. Findings underscore that optimism and pessimism drive overreaction, herding, and volatility, while also affecting asset allocation decisions. The review discusses practical implications for investors, regulators, and researchers, and identifies future research directions, including multi-modal sentiment analysis and theinteractions among behavioral biases.
DOI: 10.71222/vagryy03
Authors: Zhenqi Guo, Yingqi Luo, Qianwen Wei, Yiling Huang, Kaiyu Luo, Rongzhen Lu, Qiyan Ke, Nianjiao Peng
Institution: Guangdong University of Finance
Subfield: Finance
Domain: Social Sciences
Open Access status: hybrid
OpenAlex ID: W4416696271