An Empirical Study Of The Effect Of Auspicious And Inauspicious Days To Stock Returns In China’s Stock Market

Many researchers recently found that some noneconomic variables, such as weather, can affect mood of investors, and therefore have effects on their decisions on investments. Nowadays, researchers from home and abroad have found that variables like weather, lunar cycle, SAD and worldwide competitive sports have significant impact on stock yield. Based on the background mentioned above, this paper takes auspicious and inauspicious days, which observed from Chinese traditional almanac, as an exogenous proxy variable, to make an empirical study of the relationship of investor sentiment and stock returns.As far as the possible research outcomes are concerned, this paper has come up with three research hypotheses. Hypothesis1:auspicious and inauspicious days have an effect on investors’sentiments, and therefore have an effect on standard daily volume. Specifically, the standard daily volume during auspicious days is significantly higher than that during the days which are not auspicious, and the standard daily volume during inauspicious days is significantly lower than that during the days which are not inauspicious. Hypothesis2:auspicious and inauspicious days have an impact on shares turnover. Specifically, shares turnover during auspicious days is significant higher than that during days which are not auspicious, and shares turnover during inauspicious days is significantly lower than that during the days which are not inauspicious. Hypothesis3:auspicious and inauspicious days have an impact on stock yield. Specifically, stock yield during auspicious days is significant lowers than that during days which are not auspicious, and stock yield during inauspicious days is significantly higher than that during the days which are not inauspicious.In order to make the research outcome species, this paper firstly make stationary test and cointegration teat on data, and it turns out that all the data supports stationary and cointegration. Then, this paper makes regression on just time series data aiming to provide basis on whether auspicious and inauspicious days can affect stock yield. As far as the outcome of the regression on time serious data, auspicious and inauspicious days do not have significant effect on stock yields. Generally speaking, there are2reasons to explain this outcome, and the first one of which is the volatility of a single serious of stock yield is high. The other possible reason is that the sample size is not large enough. However, the insignificant result of the regression of time serious data cannot deny the significant outcome of the regression of the panel data. The results of the regression of panel data of the empirical study indicate that the stock standard volume during auspicious days is higher than that during the days which are not auspicious; moreover, the stock return during inauspicious days is higher than that during the days which are not inauspicious.The outcomes of regression are not exactly the same as the research hypotheses came up with previously. There are5reasons that can explain this. First of all, the share turnovers are with strong points to single shares, but this paper intend to analyze composite index of large stocks, not just single serious. Secondly, auspicious and inauspicious days can only affect the sentiments of some investors, not all of them. Thirdly, this paper is only based on Hong Kong almanac, but there are many other kinds of almanac in the market according to which investors can make their investment decisions. Forthly, many investors do not make their investment decisions just based on almanacs. They tend to combine some of their personal aspects to the almanacs. Lastly, as the proportion of institutional investors is higher and higher, the impact of investors’ sentiments on stock yields tends to decrease, and therefore decrease the effect of auspicious and inauspicious days on stock yields.For the first time, this paper combines stock yields and auspicious and inauspicious days which can affect investors’ sentiments. There are3shortcomings of this paper. The first one is that sample data of this paper does not take all almanacs into consideration, just Hong Kong almanac. Secondly, not all investor are affected by auspicious and inauspicious days, and the portion of the investors who are affected is not certain. Lastly, most researchers from home and abroad choose to use daily or monthly data, and in the future, maybe it is better to shorten the frequency, and use data that is in hour or minute. This may improve the accuracy of the research outcome, and therefore make it easy to explode the change law of security market.