Research On Interaction Mechanism Of Investors Behavior And Stock Market Based On Sentimental

In the first half of 2015, China’s stock market terminate the adjustment in past several years and witnessed a big rising, investors poured into market which made a new record, but it didn’t last long. From June, Shanghai stock composite index plummet from the highest 5178 point to the era of 2000 points in less than 2 months, investor’s pessimism exacerbated this falling. Most investors loss seriously and feel depressed, which, reflects the serious "buying the winners" phenomenon is in China’s stock market, and illustrates behaviors of Chinese investors are not completely rational, they are affected by the sentiment that from surrounding market environment and their own cognitive biases. Behavioral finance stand on the basic of the traditional finance, combine the psychology, sociology and other disciplines, using experiments and verification methods to reveal the irrational behavior and decision-making process in financial markets, which provide us a new perspective.This article is based on the research achievements of behavioral finance, first, introducing the psychology mechanism and behavior expression of sentiment; analyze the external factors that affect investor sentiment and the methods which measuring it. Then discuss the internal mechanism which sentiment effecting stock market. Select CCI, CPI, difference value of the M1&M2, the stock market turnover rate, and P/E ratio, five parameters to depict the investor sentiment. Then, construct a comprehensive investor sentiment index (ISI) by using method of PAC.In empirical part, first analyzing the relationship between the composite sentiment index and Shanghai stock index(SI), analyzes the investor sentiment’s relationship with volatility of Shanghai stock market by VAR model. The empirical results show that ISI can comprehensively reflect the trend of the SI, both have the function of the mutual influence, also verify the hypothesis that stock market volatility is put forward by the sentiment.Finally draw the conclusion:investors should know their own cognitive biases and behavior characteristics, try to avoid the weakness of "buying high and selling low" and "buying the winners". Recommend that investors should fully understand the market information, know their own psychological limitations and deviation, identity a reasonable return rate. Government should provide stable policy and orientation, which will put China’s stock market to a benign direction of protecting the small and medium-sized investors’ interests.