The Study, Based On Investor Sentiment, The Equity Premium

The investor's decision is easy to be subjected to all kinds of factors such as investor sentiment and psychology in the shares markets. Daniel Kahneman and Vernon L.Smith develop a new research method integrated the psychology of the investors into the economic research, and do a research on the abnormalities in the shares market that can not be explained in the Efficiency Market Hypothesis theory. This new theory leads the behavior finance research to a new phase, and the effect of the investor sentiment and psychology to the shares markets is a new vital research task. With the rapid development of the capital markets in the world, the research on the investor sentiment effect to the investment gradually shows its significance both theoretically and practically.Based on this research background, this thesis does a study on how the investor sentiment can affect the premium in the shares market. Throughout the empirical research on the sentiment factors in the invest decision-making and the shares premium phenomenon, we draw a conclusion that the Chinese investors can also be affected by the sentiment factors. In this thesis, we also distinguish the shares through the current market value, and the result is that both the shares whether large or small is subjected to the investor sentiment. The only distinction is that they are different in the response to the sentiment, and the small shares can be more sensitive than the large one. This is largely related to the status of the Chinese shares market and the constitution of the investors. And retail investors are in majority.