Empirical Study On The Effects Of Sentiment For Personal Investment Decision-making

As behavioral finance have been extensively studied, researchers found that because of the investors’ cognitive biases and bounded rationality, investors’ decision-making process is not always seek to maximize its own economic interests, but due to the impact of investor psychology, sentiment and personality, they will exhibit irrational behavior. Therefore, the study of investor psychology, emotion and personality has become a hot research topic in recent years.On the background of China’s securities market, this paper deals with the impact of investor sentiment on their decision behavior systematically:firstly, based on the existing research, and analyzing the influence of investors on their investment decision-making theoretically; Secondly, through the initial methods of combining the questionnaire and empirical analysis, by constructing a VAR model(vector auto regression model), using a variety of econometric methods, such as factor analysis, regression analysis, ADF tests, Granger causality test, impulse response function and variance decomposition, from the perspective of the subjective and objective aspects, makes thorough and careful research into investor sentiment on their investment decision-making. The main conclusions of this paper are as follows:(1)By judging the investors’ sentiment and behavior, directed towards the investor sentiment of over-confidence, herd psychological and the failure of self control, the investors’ behavior of speculativeness, risk avoid, disposition effect and excessive trading, analyzing the relationship between investors’ sentiment and behavior. Results show that the effects of sentiment to the investors’ behavior exist in China market, validate most of the hypotheses, and the disposal effect is most significantly affected by the investor sentiment.(2)Different impacts of investors’ sentiment on their investment behavior have been found. In a bull market, the effect is significant, but in a bear market is not. Finally, based on the application of this research results and the development of securities market in China, put forward some recommendations.