Unraveling Retail Investor Sentiment and Its Role in Stock Market Volatility

This study delves into the intricate relationship between retail investor sentiment and stock market volatility through the lens of behavioral finance. The massive spread of social media platforms including Twitter and Reddit during modern times has led to retail investor behavioral biases such as herding and overreacting which today significantly affect market movements. The research uses the literature review approach as its primary method but it mainly presents previous research findings in addition to explanation of theoretical frameworks and investigation methods. Once negative retail market sentiments appear in the market the study shows volatility levels intensify. Market volatility transmission occurs because investors combine price differences with washroom actions related to changing market sentiment. The proposed solution contains two components for investor distortion management which combines educational measures with circuit breaker safeguard protocols. The research offers real-world directions to financial market stakeholders who need to handle sentiment-caused economic risks across various market cycles of today's interconnected financial system.