Research On Investor Sentiment And Its Effects On China Stock Market

Efficient market theory assumes that the market participants are rational and the asset prices fully reflect all of the available information of the market,which means that any investigator cannot beat the market to achieve excess income by technical analysis or fundamental analysis.However,based on the study of “Internet bubble in 1999”,“stock market crash in 1987” and other financial contagions,it has been shown that investors are not perfect rationality,but bounded rationality,and even irrational.In the 1980 s,from the perspective of psychology,behavior and sociology,behavior finance made an in-depth study on the irrational behavior in the financial market and pointed out that the intrinsic value is not entirely determined by the intrinsic value of assets,but largely influenced by the investor behavior.Investor sentiment and the resulting behavior have an important impact on the decision and change of the security price.In this context,this paper will investigate the measurement of investor sentiment and its impact on the stock market,and then further examine the role of investor sentiment in the stock market and its impact.This thesis will focus on the following problems.The first problem is the measure of the investor sentiment,which is the basis of the following empirical research.The second problem is the validity of investor sentiment,which is the necessary condition to ensure the accuracy of the research conclusion.Then,the empirical study on the impact of investor sentiment on stock market will be investigated based on the following:whether the investor sentiment has the ability to predict the market,what kind of dynamic relationship exists between investor sentiment and market rate of return,whether the investor sentiment fluctuations are the factors that constitute the rate of return volatility;whether the investor sentiment has an asymmetric impact on the fluctuation ratio.Finally,countermeasure suggestions are given based on the content of this thesis.Through the study of investor sentiment effect of Chinese stock market,some conclusions are summarized as follows.Firstly,there is a long-term equilibrium relationship between rational investor sentiment and stock price,which is an important force that constitutes a short-term volatility in market prices.Secondly,there is a singlerelationship between the rational investor sentiment and return rate,in other words,the fluctuation of rational investor sentiment is one of the reasons for the change of return rate,but there is no indication that the change of the return rate is the reason of the fluctuation of rational investor sentiment.Thirdly,through the analysis of variance decomposition of the impact effect,it is shown that the fluctuation of investor sentiment has little contribution to the change of return rate,but the short-term influence between variables will form a cumulative effect in a long period of time.Fourthly,the effect of investor sentiment on the volatility is asymmetric and the impact caused by the pessimistic rational investor sentiment is greater than that one caused by the optimistic investor sentiment.In addition,the impact on the change of the return rate caused by the pessimistic irrational investor sentiment is less than that one caused by the optimistic investor sentiment.This paper proposes a new method to construct the investor sentiment by using the website visit.The proposed method makes full use of the investor sentiment information contained in the website visit,and expands the measure method of investor sentiment.In this paper,the statistical method of Pearson's correlation coefficient and Kendall correlation coefficient is applied to the investor's emotional validity test for the first time,and the validity test method of investor sentiment measure is put forward.The theoretical basis of the evaluation of the investors' emotional measure is also provided.This paper is the further study of the previous research on the investor sentiment,enriches the investor sentiment theory,which is a useful supplement to the existing behavioral finance theory.It aims to revealing the objective law between investor sentiment and stock price movements in China and providing evidence for the theory of behavioral finance from Chinese stock market.Meanwhile,it also provides policy basis for regulators to stabilize the stock market by controlling investor sentiment and to reduce the risk of the stock market to the real economy.However,it is undeniable that this research on investor sentiment is not enough,especially in emerging markets such as China's stock market.The fluctuations in investor sentiment may bring more uncertainties to the market and it is necessary to further understanding the objective laws between the investor sentiment and the Chinese stock market price changes in the future.