A Comparative Analysis Of China 's Main Board And Small Board Market Returns Based On Investor' S Mood

The hypothesis of the Classical Finance is investor’s perfect rationality and market efficiency, but it can’t provide reasonable explanations to many anormalies on the financial market. Based on the assumption of investor’s bounded rationality, Behavior Finance verified that investor sentiment have an impact on the stock prices and its fluctuation. As a backstone of Behavior Finance, the theory of investor sentiment has developed quickly, a lot of scholars started to learn the relationship between investor sentiment and securities return.The SME board market has experienced more than ten years of development process, which already became a very important element of Chinese securities markets. It is quite different from main board market in many respects, among which the investment bubble and high volatility of SME board is the most obvious problem, more irrational trading behaviors have emerged on the SME board. Based on investor sentiment, this paper make intensive study on the relationships between the investor sentiment and the two different markets, explore the similarities and differences, study whether investor sentiment play a more significant role in the fluctuation of SME board.This paper firstly select four original investor sentiment indexes, establish an aggregative investor sentiment index by principal component analysis, this aggregative index can reflect the variation conditions of investor sentiment effectively. Then choose vector autoregression model(VAR) to study and compare the dynamic interaction between investor sentiment and the two markets’return. Finally establish EGARCH model to compare the influences of change and fluctuatiqn of investor sentiment on SME board and main board. The overall conclusions are as follows: Both the lag phases of investor sentiment and its change and fluctuation will have greater influence on SME board market; the fluctuation of investor sentiment forms a systemic risk of SME board but doesn’t form a systemic risk of main board. In a word, the SME board return turns out to be more sensitive to investor sentiment variation.By study on the relationship between investor sentiment and two different markets’returns, this paper reached some conclusions that have guiding significance on individual investors making investment strategies, at the same time provide reality basis to regulators when strengthening supervision and making policies that promotes the stock market to become more mature.