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Annual Review of Financial Economics

Volume 10, 2018

Measuring Investor Sentiment

Abstract

Investor sentiment indicates how far an asset value deviates from its economic fundamentals. In this article, we review various measures of investor sentiment based on market, survey, and text and media data. There is ample evidence that sentiment can explain returns on stocks that are difficult to value and costly to arbitrage, such as unprofitable stocks, non-dividend-paying stocks, extreme growth stocks, and distressed stocks. However, much remains to be done. We discuss three issues for future research: aggregating measures over various sources and various time horizons, linking investor sentiment to technical analysis, and statistically modeling the evolution of investor sentiment.

Keyword(s): behavioral finance, investor optimism, investor survey, JEL C58, JEL G12, JEL G14, predictability, sentiment, technical analysis, textual analysis
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2018-11-01
2025-04-26
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/content/journals/10.1146/annurev-financial-110217-022725
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Measuring Investor Sentiment
Annual Review of Financial Economics 10, 239 (2018); https://doi.org/10.1146/annurev-financial-110217-022725
/content/journals/10.1146/annurev-financial-110217-022725
/content/journals/10.1146/annurev-financial-110217-022725
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