Psychological Echoes: Exploring Investor Sentiments Across Market Events

ABSTRACT This paper aims to present a comprehensive review of existing literature that explores the interplay between psychological factors and investors’ financial behavior in the context of significant events. We retrieved data from the Scopus database from 1991 to 2023. We employed content analysis and bibliometric analysis to reveal the publication trends, citation and authorship records, event types, theories, and psychological aspects associated with the studies. The area of study has grown significantly since 2007. The most prominent keywords were “event study,” “herding,” “behavioral finance,” and “Covid‐19.” The keyword co‐occurrence reveals seven key themes. The efficient market hypothesis is the most cited theory, followed by the prospect theory. Manmade and negative financial events are among the most frequently studied events. Investor sentiment, investor reaction, and herding behavior are the most common psychological aspects. Despite the interest in studying the impact of an external event on investor psychology and investment decisions, no study has carefully explored the intricacies of intellectual progress in this rich body of literature. We measure and assess three decades of research on event‐related investors’ behavior published in prominent journals. This would benefit future researchers interested in understanding event‐related investors’ sentiments from the lens of behavioral finance.