The Research On The Impact Of Investor Sentiment On The Chinese Stock Markets

Under the assumptions of ‘rational persons' and efficient market,traditional financial theory has been unable to explain many financial asset price anomalies,so this paper tries to seek answers from the perspective of behavioral finance.With the continuous development of investor beliefs,preferences and psychology,the study of the interaction between investor sentiment and stock market has gradually become a hot issue in the field of behavioral finance.Therefore,this paper starts with the measurement and effectiveness analysis of investor sentiment,and explores the impact of investor sentiment on Chinese stock market from the two aspects of theoretical analysis and empirical analysis,which helps to make it clear that the impact and function mechanism of investor sentiment on market returns,volatility and return-volatility relationship.On the basis of proposing research hypothesis through the theoretical analysis and the econometric methods such as linear regression model,quantile regression model,vector autoregression model,time series model,threshold regression model and so on,this paper designs the effective empirical analysis models,verifies the proposed hypothesis by choosing Chinese stock market data as the research object,and obtains the research conclusions about the impact of investor sentiment on the stock market return,volatility,return-volatility relationship as well as the correlated impact between lagged indicators.The main achievements of this paper are summarized as follows.First,according to the characteristics of China's stock market,this paper selects the appropriate index system for measuring the investor sentiment,and then constructs the investor sentiment index by principal component analysis.By means of the judgment of sentiment index timeliness,the selection of different principal components and the elimination of macroeconomic effects,this paper discusses the proposed investor sentiment index.Meanwhile,we test the effectiveness of sentiment index by qualitative analysis and quantitative analysis.Second,this paper reveals the interaction effect,Granger causality relationship and impulse response mechanism between investor sentiment and Chinese stock market returns from two levels of short-term and long-term effects.The research results indicate that market returns can explain changes in investor sentiment in the short term,while investor sentiment can be used to predict market returns and to explain the phenomenon of earnings reversals.There is a certain Grainger causality relationship between investor sentiment and market returns,and similar results are also obtained for impulse response analysis.Third,this paper studies the impact of investor sentiment on Chinese market volatility based on variance volatility,realized volatility and range-based volatility.The research results show that investor sentiment has a positive impact in promoting market volatility.Investor sentiment is the Granger reason of stock market volatility,which means the fluctuation of stock market volatility is caused by the change of investor sentiment.Particularly,when market volatility and investor sentiment are low,the relationship between the market volatility and investor sentiment is more sensitive.Meanwhile,impulse response analysis shows that investor sentiment index has a persist impact on market volatility,but the impact of stock market volatility on investor sentiment is limited.The above conclusions are robust to the measurement of different volatility and different market sample selections.Finally,this paper finds that the impact of different investor sentiment state on the return-volatility relationship is different.That is,in the period of high investor sentiment,the return-volatility relationship of the market is negatively correlated;while in the period of low investor sentiment,the return-volatility relationship of the market is positively correlated.The conclusions of this study are robust to different models such as linear regression model and threshold regression model.The conclusions of this paper can enrich and perfect the existing behavioral finance theory,and it has important reference value for improving the relevant transaction system and regulatory rules,promoting the healthy development of the stock market and guiding the practice of investors.