Research On The Impact Of Investor Sentiment On Coal Market Price

Since 1993,the government has gradually promoted market-oriented reform in coal prices.Under market regulation,the trend of coal price is more in line with the demand of market supply and demand,however,the market cannot solve the problem of excessive price fluctuations.For the first time in 2008,China's coal price index rose and fell irrationally.In order to stabilize the price fluctuation of coal and circumvent the risk of price fluctuation in the market,China has successively introduced coke futures in April 2011,coking coal futures in April 2012 and steam coal futures in September 2013.However,the "irrational" rise in China's coal prices appeared again in 2016.It can be seen that relying on market regulation mechanisms cannot completely avoid "irrational" fluctuations in coal prices.Therefore,it is necessary to discuss the cause of price irrationality.With the rise of Behavioral Economics and Behavioral Finance,investors'“bounded rationality”has attracted a lot of attention,which makes it possible to explain the reason of price deviation of value from the perspective of investors'psychology.Furthermore,considering the countless relationship between financial market and spot market,taking investor sentiment in financial market as a start and with the support of information transfer relations among different markets,this thesis explores the existence and characteristics of the influence of investor sentiment on coal market prices.The logical structure of this paper contains four sections:Firstly,based on concept definition and analysis of sheep financial behavior in coal financial market,we use theoretical research and literature analysis to construct an effective influence transmission mechanism;Secondly,we use principal component analysis to build the investor sentiment index.M oreover,VAR model and impulse response function are used to study the long-term and short-term relationship between investor sentiment index and coal stock index price;Thirdly,we use correlation test,ADF stationarity test,Granger causality test and BEKK-GARCH model to empirically analyze the price between coal markets;Finally,we use the VAR model,cointegration test and TVP-SV-VAR model to analyze the effects of investor sentiment on coal futures price and coal spot price in a static and dynamic way.Based on these four major studies,the main conclusions are shown as follows:1.Based on the bi-system thinking model of "limited rational person",this thesis selected proxy indicators from three aspects,i.e.investor's attention rate,actual investment volume and downstream industry quotations,and constructed investor sentiment index of coal industry which accords with the industry's characteristics.Comparing with investor sentiment of the market,validity of the constructed investor sentiment of coal industry has been proved.Known from the tendency chart as well as the empirical results of VAR model,optimistic investor sentiment can promote the price of coal stock to rise,pessimistic coal investor sentiment would hinder the rise.When the investor sentiment of the market grows high enough,pessimistic investor sentiment in coal industry will turn to optimistic sentiment,and then bring up the price of coal stock index2.By adopting the BEKK model,obvious volatility spillover relationship was found amongthe p rices of coal stock,futures and spot market,which indicates that“information bridges" exist among these three coal markets.Investor's sentiment can bring influence on the price of coal market via the“information bridges"across different markets.3.With futures price discovery function,this thesis first studies the cross-market impact of investor sentiment on the price of coal futures.This thesis found out that there's a long-term balanced relationship among investor sentiment of coal industry,coal stock price and coal futures price.When the futures market system is perfect and trade is active,pessimistic investor sentiment will bring negative impact on coal futures price across financial markets.Secondly,with static and dynamic analysis towards investor sentiment of coal industry,coal stock price and coal spot price,the research found out long-term balanced relationship exists among these three as well.B efore 2014,investor sentiment could impact the coal spot price via coal stock market,and while the pessimistic sentiment deepened,negative influence had increased gradually,but after 2014,the negative influence has decreased gradually.The level of impact has remained low.Finally,with the analysis on investor sentiment of coal industry and coal futures price's impact on coal spot price,it appears that launch of coal futures products can weaken the impact from investor sentiment onto coal spot price,which plays a certain role in risk aversion.In conclusion,first of all,this paper proposes the transmission mechanism of investor sentiment affecting coal market price for the first time,and studies the time-varying characteristics of the influence.Secondly,the paper quantifies the index of investor sentiment in coal industry from the multi-dimensional selection index and sets up the index of investor sentiment in coal industry.Finally,we verify the cross-market contagion effect of investor sentiment in China.