Abstract
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.
Highlights
Behavioural finance is a research area that applies psychological theories to financial models to explain market anomalies (Shiller, 2003)
The analysis assesses the foundations of investor sentiment and the results show that this research area is based on articles related to traditional finance and to behavioural finance
The analysis of the foundations of investor sentiment through reference co-citation analysis shows that investor sentiment is related to other behaviours studied by behavioural finance such as the disposition effect
Summary
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).
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