The Effects Of Different Investor Sentiment On Stock Price Behaviors

Based on the hypothesis of "perfect markets" and "rational people", Classical financialtheory argues that assets price on the financial market is only related to the intrinsic value ofthe assets, namely, the change of asset price is affected by the fundamentals of informationonly. Recently, the rise of behavioral finance theory propose that investors in financialmarkets is limited rational, in the incomplete market, investors’ psychological factors in theprocess of investment have an important impact on asset prices in addition to the basic valueof the asset.Investor sentiment is a normal psychological phenomenon of investors when theyparticipate in the market. It have an important impact on asset prices for that the investorsentiment will throughout the investment decision-making process, and the rational investors’thoughts exist at the same time, the common decision of investors decision-making behavior.Since the DSSW proposed the Noise Trading Model, many scholars have researched theeffect of investor sentiment on the stock price behavior. But the current domestic researchon investor sentiment is simple try to test the relationship of investor sentiment between thestock returns stock and returns volatility, as for the microscopic mechanism of effect processabout investor sentiment to stock price behavior, also rarely, few scholars have researched it.This thesis build an investor sentiment index by using data of Shanghai stock exchange，then filters out its autocorrelation and obtains the innovation of investor sentiment. We dividethe investor sentiment into positive and passive investor sentiment, and analyze thecharacteristics of investors’ behavioral traits in different sentiment state. We then research theasymmetrical influence of positive and negative emotion on stock price behaviors by usingDummy Variable model, GARCH-model and RV-AR-model. The results show that in Chinesestock market, the models which has considered different sentiment state has better fittingeffect; positive investor sentiment have a significant impact on stock returns， but the effectof passive investor sentiment on stock returns is not significant, this is because rationalcomponent play a leading role in the market when sentiment is low. Besides, the volatility ofinvestor sentiment has great explanation ability to the volatility of stock returns.