Research On Value Discovery Of Public Funds Based On Investor Attention And Investor Sentimen

Researches on the investor sentiment are fast-developing in the field of behavioral finance.Based on the limited cognition and unique preference,the trading participants form the expectation for the future after the incremental information has been generated.The amount and composition of investors’ attention as well as the nature and performance of investors’ sentiment are the concrete externalization of the expectation.Investors’ attention,investors’ sentiment and their changes further affect the behavior of the trading participants and the pricing of the securities.Mutual funds are an important component of China’s capital market.There have been a large number of actively managed whole market stock selection funds,the issuance of industry themed funds has been popular,and the mutual Fund of Funds(FOF)in the third pillar of pension performs beyond expectation.Mutual funds have become an important way for small and medium-sized investors to enter the capital market,and the major vehicle of FOF for allocating.It is of great practical significance to study the relationship between investor attention,investor sentiment and the performance,operation management of mutual funds.At the same time,studying the investor sentiment expands our knowledge in the research fields of fund manager behavior as well as fund performance evaluation and attribution.The capital market is embodied as the clustering of volatility in the short horizon and the mean reversals of volatility in the long horizon.The characteristics and connotation of capital market varies in hierarchical time scales and levels.In the long run,retail investors in the A-share market have the most weight in terms of quantity proportion and trading volume contribution,and the characteristics of short-term momentum long-term reversal are obvious;Recently,the fund industry is developing fast toward "institutionalization" and "professionalization".Momentum traders received incremental attention,and the momentum characteristics of the securities market are becoming more and more prominent.In view of the heterogeneity of investor attention and investor sentiment,this paper analyzes the attention behavior of different participants and investor sentiment at different levels,and investigates the relationship between investor attention and fund performance and its role in the active management of fund managers.This will help playback the strategies and ideas of fund managers.This paper selects diverse proxies to describe and characterize investors’ attention behavior and sentiment performance from the macro,meso and micro levels,and then analyzes its impact on fund investment.Among them,macro level indicators represent investors’ emotions and views on the whole economy;The meso level measures investors’ sentiment towards the stock market;The data of sentiment indicators at the micro level comes from investors’ attention to each stock.This paper is mainly made up of following sections.I.An industry momentum strategy based on the abnormal attention of individual investors is proposed.This section studies the ability of individual investors’ abnormal attention to predict the industry momentum(and momentum reversal)in binal market states.The results show that abnormal attention can predict the industry momentum return positively(negatively)in the upward(downward)market state;It is verified that this prediction is robust after controlling key business cycle variables.Furthermore,this section puts forward the industry momentum circulation path(IMCP)hypothesis,which provides a new perspective and insight for the managers of actively managed whole market stock selection fund,the scholars who are committed to analyzing the behavioral finance anomalies related to momentum and the FOF investment managers who implement the rotation strategy with ETF or industry theme funds as the carrier.II.This section analyzes the heterogeneous response of mutual funds to the attention behavior of different trading subjects,and studies the contribution of the risk exposure(attention beta)exposed by fund managers in the attention of institutional investors to the fund performance.The phenomenon of information asymmetry in the market makes the information advantage party(insiders)profit from continuous transactions with the information disadvantage party(non-insiders).Many literatures have confirmed that the relative information advantage of institutional investors can help them pursuit excess returns.In order to describe the research behavior of institutional investors and reflect their emotional characteristics distinct from that of individual investors,in the face of the characteristics of "sparseness","discreteness" and "impulsiveness" of institutional investors’ attention events,this paper proposes an index compilation idea that weights the signal value of a specific survey event and decays over time.By studying the relationship between institutional investors’ attention beta and fund performance,and the use of institutional attention beta by fund managers in their active management process,this section reveals the way of transforming the above relative information advantage into excess return from a novel perspective;Meanwhile,it compares and analyzes the relationship between individual investors’ abnormal attention and fund performance.It also founds that fund managers will not adopt individual investors’ abnormal attention as solely indicator for timing while managing the fund actively,which is compatible with the argument in Chapter3 that abnormal attention needs to be combined with the market state to play a predictive role.III.Following the paradigm of "Unfold holdings,Estimate position,Beta weighting and Performance analysis",this section obtains the fund sentiment beta,analyzes the distinct relationship between the current and previous period sentiment beta and the fund performance,and confirms that the fund managers take advantage of investor sentiment in active management.Most mutual funds are more or less momentum strategy trading characteristics;The periodic change(inflection point)of classical risk factors,including momentum factor,is also believed to be influenced by investor sentiment;Investor sentiment has proven to price risk factors.For the changes of medium and micro sentiment of investors(including noise traders),fund managers often do not react immediately,but digest,control,coexist and utilize of them later.After using the traditional classical factor model to attribute the fund performance,this paper finds that there are still some portion that can be explained by investor sentiment,and therefore believes that the fund managers allocate exposure on investor sentiment or utilize it while timing,and then studies and verifies it from the perspectives of ability stratification,timing ability bootstrap test,analysis on coefficient of determination and so on.IV.This section investigates the relationship between macro sentiment changes and fund spot performance.In front of changes in macro sentiment,fund investors often respond immediately and price quickly and thoroughly.This section reproduces SSE 50 ETF Volatility Index(i VIX)and decomposes it via EEMD method(Ensemble Empirical Mode Decomposition),takes the residual term(TVIX)as the long-term trend term to reflect the domestic macro sentiment consequently,and then explains diverse reaction tactics of institutional investors for the changes of long-term macro sentiment as well as medium and micro investment sentiment.Macro sentiment is often gradual and forecast-able.In the daily process of fund management,it is uneconomical to lay aside too much loadings on macro sentiment factor.Envisaging sudden and unexpected fluctuations in macro sentiment,skilled fund managers will make trade-offs between the fund’s long-term performance and short-term drawdown,and choose the former.Once surprising twists,it will be quickly captured and receive fully pricing;After that,if the investment strategy is still deployed based on macro sentiment,it will not be able to contribute to the excess return.This paper features in the description of investors’ attention behavior and emotional performance from three perspectives: micro,meso and macro.Specific innovations include the following aspects:At the micro level,(1)this paper adopts the investor attention,which is closely related to investor sentiment,as the proxy variable.Taking into account that domestic individual investors mostly have reversal effect and disposal effect,while institutional investors prefer momentum trading,this paper combines the abnormal attention of individual investors with industry momentum and reversal,and puts forward the "IMCP hypothesis",which provides a new viewpoint and perspective for the development of industry rotation strategy;(2)this paper organically integrates the institutional investors’ research and analyst coverage,puts forward the preparation scheme of the attention index of institutional investors,and points out the sustainable impact of institutional research on fund performance.At the meso level,the optimized investor sentiment index(OISI)stemmed from another literature is selected to replace the traditional CICSI index in domestic literature,the exposure load of fund managers to investor sentiment is studied,and the stability and timing characteristics of performance are analyzed.At the macro level,the SSE 50 ETF Volatility Index(i VIX)is reproduced and decomposed by EEMD,the residual term(TVIX)is treated as the long-term trend term to reflect the domestic macro sentiment,and the timing ability of fund managers to macro sentiment is studied.The management of funds by professionals is a process of striving for value creation.Both academia and industry are very interested in whether people can enhance the quantity and quality of earnings through the sentiment analysis of the success of the stock market as well as reduce the cost(i.e.risk)brought by the pursuit of earnings.The so-called value in this paper can be regarded as the quality of fund management by fund managers.This degree of quality can be reflected in the ability to create excess returns,the tracking error of the fund,the active management degree of the fund manager,and the timing ability of the fund manager.In various regressions and tests,these are mostly treated as dependent variables of regression analysis,grouping criterion of factor analysis and test variables of bootstrap analysis.In conclusion,this research shows that the attention behavior of different trading participants and heterogeneous investor sentiment have different effects on the trading behavior of fund managers.The paper will supply the research on behavior deviation and fund performance in behavioral finance,be profit to playback the strategies and ideas of fund managers,help to search for excellent funds and skilled managers to create value,and will deepen the understanding of the value discovery of mutual funds.