Behavioral Asset Pricing Model And Its Empirical Study Based On Investor Sentiment

Behavioral finance studies have shown that,investor sentiment affects the individual stock's price and its cross-section return,but also has an impact on the stable operation of the market.For the issue of investor sentiment in the stock market,this paper carried out the following research:(1)In order to achieve better pricing results,the beta of market excess returns should be adjusted in asset pricing models,motived by thought of conditional asset pricing.Suppose that the market excess return betas can be represented as a function on investor sentiment and corporate identity factor(the size and B/M of the company).On this basis,considered some financial anomalies,such as market factor,scale factor,the B/M factor,factor,liquidity factor and momentum factor,a conditional asset pricing model based on investor sentiment is constructed.The monthly data of Shanghai and Shenzhen A-share is empirically investigated the role of investor sentiment as the condition information on asset pricing under a variety of financial by using two-stage regression model.The results show that the conditional asset pricing model including investor sentiment effectively improves the efficiency of asset pricing,and successfully explained a variety of financial anomalies.(2)a number of theoretical and empirical studies have shown that investor sentiment maybe the risk factor causing market volatility.However,these investigations are qualitative analysis from the macro fluctuations,and lack of detailed quantitative analysis of impact of the risk factor caused investor sentiment on asset pricing.To this end,according to the priciple of size factor and B/M factor in Fama-French three-factor model,it calculates investor sentiment's risk factor of each stock by using the yield difference between sensitive and non-sensitive portfolios for investor sentiment,and constructs a conditional asset pricing model including investor sentiment risk factors and a variety of financial anomalies' factors.The monthly data of Shanghai and Shenzhen A-share is empirically investigated the role of the risk factor due to investor sentiment on asset pricing under a variety of financial by using two-stage regression model.The results documented that the risk factor caused by investor sentiment will have a significant impact on asset pricing,which combines with market factors,scale factor,B/M factor,liquility factor and momentum factor to constitute the important factors that affect the pricing of assets.(3)The impact of investor sentiment on the return and volatility of risk assets might be the interaction among "Price Pressure" effect,"Hold More" effect,"Friedman" effect and "Create Space" effect."Hold more" effect and "Price Pressure" effect have an impact on the direction of noise trader sentiment's change,which will have a direct influence on the expected return.While"Friedman" effect and "Create Space" effect is related to the size of noise trader's mood changes,which indirectly affects the expected benefits by noise traders to change the wrong perception of risk assets.According to the above principle,it constructs an improved GARCH-M model by combining some macroeconomic variables,such as inflation rate,change rate of risk-free and the industrial production,which can predict the return of stock index.The model is employed to empirically analyze the impact difference of investor sentiment on the stock's return and volatility in China's mainland,Hong Kong of China,the United States and Japan.