Investor Sentiment Index: A Systematic Review

The Investor Sentiment Index (ISI) is widely regarded as a useful measure to gauge the overall mood of the market. Investor panic may result in contagion, causing failure in financial markets. Market participants widely use the ISI indicator to understand price fluctuations and related opportunities. As a result, it is imperative to systematically review the compiled literature on the subject. In addition to reviewing past studies on the ISI, this paper attempts a bibliometric analysis (BA) to understand any related publications. We systematically review over 100 articles and carry out a BA on a set of information based on the publication year, the journal, the countries/territories, the deployed statistical tools and techniques, a citation analysis, and a content analysis. This analysis further strengthens the study by establishing interesting findings. Most articles use the Baker and Wurgler index and text-based sentiment analysis. However, an Internet-search-based ISI was also used in a few of the studies. The results reveal the lack of direct measures or a robust qualitative approach in constructing the ISI. The findings further indicate a vast research gap in emerging economies, such as India’s. This study had no limit on the period for inclusion and exclusion. We believe that our current work is a seminal study, jointly involving a systematic literature review and BA, that will enormously facilitate academicians and practitioners working on the ISI.