Question

Find current event news/article about Behavioral Finance, Summarize the article.

Note: No handwriten

Answer 1

Answer :

Investor sentiment is a research area in the theoretical field of behavioural finance that analyses the sentiment of investors and the way it influences stock market activity. Recently, there has been an increase in the number of publications in this area, which indicates its incremental relevance. To date, there is no consensus on the theoretical structure of behavioural finance nor on the investor sentiment research area. We have used co-citation, bibliographic coupling and co-occurrence analysis to provide an overview of the structure of investor sentiment. Therefore, this study contributes to defining the theoretical structure of investor sentiment by identifying the foundations of the research area and main journals, references, authors, or keywords, which represent the core of knowledge of this research area. The results obtained suggest that investor sentiment is related to efficient market theory and behavioural finance theories. Furthermore, investor sentiment is a relevant research field, especially since 2014. Advances in computer science or theories based on physics or mathematics can help to better define the influence of investor sentiment on stock markets. This study advances research on investor sentiment within the field of behavioural finance, thus showing its relevance.

Behavioural finance is a research area that applies psychological theories to financial models to explain market anomalies (Shiller, 2003). One of these theories is prospect theory, based on expected utility theory with the probability replaced by weights (Kahneman & Tversky, 1979). Another theory is the disposition effect or the tendency of investors to hold assets that have lost value (losers) for too long and sell those that have gained value (winners) too early (Shefrin & Statman, 1985). Overconfidence is another theory that refers to the tendency to overestimate our own abilities and knowledge (Fischhoff, Slovic, & Lichtenstein, 1977; Michailova, Mačiulis & Tvaronavičienė, 2017). Therefore, behavioural finance analyses investor behaviour and how it affects stock markets from a psychological point of view. Since ethics and emotions influence financial performance (Cuomo et al., 2018) and behavioural functions are used to analyse financial markets (Khan, Shaorong & Ullah, 2017), behavioural finance has become an interesting research field.

Within the great variety of concepts studied by behavioural finance, there is one that is acquiring great relevance in recent years: investor sentiment and its relationship with real economy (Lacalle, 2018) or stock market activity (Barberis, Shleifer & Vishny, 1998). This relevance is reflected in the increase in the number of publications in recent years from around 10 in 2002 to over 100 in 2016. This increase is partly due to the emergence of a new measure of sentiment – microblogging or social network sentiment – encouraged by social networks and the emergence of language processing software (Houlihan & Creamer, 2017; Kim & Kim, 2014; Makrehchi, Shah, & Liao, 2013; Piñeiro-Chousa, López-Cabarcos, & Pérez-Pico, 2016).

Due to the recent increase in publications, investor sentiment literature lacks cohesion. This situation is also a defining trait of the area of behavioural finance. The main reason is that both are young areas that are still growing rapidly. In this sense, Costa, de Melo Carvalho, de Melo Moreira and do Prado (2017) conducted a bibliometric analysis of the association between ‘behavioural finance,’ ‘financial and managerial decision making,’ ‘overconfidence,’ ‘anchoring effect’ and ‘confirmation bias’. Their study has contributed to the advancement of knowledge in this research area, but it addresses only part of the theoretical field of behavioural finance. To date, no bibliometric analyses have focused on investor sentiment as part of the field of behavioural finance. Therefore, the aim of this study was to identify the foundations, relevant authors, relevant journals and the core of knowledge of investor sentiment research in the theoretical field of behavioural finance. This analysis provided a general overview of the structure of investor sentiment, establishing its basis and the most relevant aspects studied. Furthermore, the study identified possible future research lines within the investor sentiment research field.