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Finance and Credit
 

The sentiment analysis method in finance: The psychological-financial index

Vol. 27, Iss. 3, MARCH 2021

Received: 11 February 2021

Received in revised form: 25 February 2021

Accepted: 11 March 2021

Available online: 30 March 2021

Subject Heading: THEORY OF FINANCE

JEL Classification: G32

Pages: 561–584

https://doi.org/10.24891/fc.27.3.561

Sergei Yu. BOGATYREV Financial University under Government of Russian Federation, Moscow, Russian Federation
sbogatyrev@fa.ru

https://orcid.org/0000-0002-6080-5869

Subject. The article discusses contemporary means of measuring emotions of those who make financial decisions.
Objectives. Analyzing key means of sentiment analysis in Russia and abroad, the study is to create a tool, which would be applicable to valuation and provide the unbiased information about the emotional state of those who locally make financial decisions. I also demonstrate limited capabilities of contemporary information systems in terms of emotion measurement, valuation, and present means to address the imperfection of the existing news tone measurement framework, unveil the content of new emotion measurement techniques, which would be useful to appraisers and cost analysts.
Methods. The study is based on the induction and deduction for opinion poll processing, narrative analysis in data environments. I display the nexus with new technological means of modern information systems.
Results. The article unveils the substance of key methods for setting the psychological-financial index, modern means of sentiment analysis in the new setting of the digital economy and Big Data. I scrutinize key constituents of the psychological-financial index and its use in the current circumstances of the post-COVID-19 economy. The article shows how psychological measurement methods can be implemented as part of the narrative analysis.
Conclusions and Relevance. Financial analysts get new opportunities when using new achievements of behavioral finance and modern psychological studies. As the use of the psychological-financial index shows in analyzing market anomalies, there appear more opportunities for explaining the irrational behavior of market agents in its various segments. New standards are set as they are needed for valuation purposes, when financial analysts use them. Reporting is normalized. I provide an outlook of the analytical apparatus development and new indicators to use valuation results more efficiently. The findings hereof are applicable to the practice of contemporary appraisers, cost and fundamental analysts. It is especially important to use sentiment analysis tools in the digital economy, during the instability and crisis, change in the market paradigm, market shifts, changes in the comparability metrics, distortion of traditional financial and economic indicators, market volatility. The use of the psychological-financial index supplements and expands the scope of classical measurement tools and increase the quality of valuation.

Keywords: appraisal, emotion measurement, emotional finance, behavioral finance, psycho-financial index

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