The Influence Between Investors’ Sentiment Index And B-(foreign) Shares Market In Chinese Financial Market

This paper selects six sentiment indexes including consumer-confidence index, "Haodan" index, newly opened transaction accounts,market-adjusted share return of IPOs,closed-end fund discount, monthly average first day’s turnover rate as the basis for making comprehensive Investors’ Sentiment Index. The comprehensive index by using Principal Component Analysis method can effectively evaluate Chinese investors’ sentiment, when the influence of economic fundamentals are controlled. Then, this paper use the ARMA-GARCH-type models to examine time-series data of the comprehensive investors’ sentiment index and the returns of B-share market index separately with the purpose of capturing the autoregression and the heteroscedasticity of both effectively.Then, use Granger causality test to study the causality between comprehensive investor’s sentiment index sequence and B-share index’s logarithm yield sequence.Finally, use the method of empirical regression analysis to study whether there is the "reversal effect" between comprehensive investor’s sentiment index sequence and B-share index’s logarithm yield sequenceGranger causality test and robustness analysis shows that fluctuation in investor’s sentiment affects the fluctuation of the shenzhen B-share index in the short and long sample period. And the effect of investor’s sentiment fluctuation on the Shanghai B-share index is significantly during the long sample period. It shows that investor’s sentiment affects Shanghai B-share index with a longer time-lag. Shanghai B-share index affects investor’s sentiment in the middle-long sample period, and shenzhen B-share index has an effect on investor’s sentiment in the short term. The effects of both indexes on investor’s sentiment are different in their time-lag, in that the differences between stock market indexes in the sampled stocks structure, trading currency and exchange rate,microstructure of investors, the listed companies structure of B-share, as well as,the influence of A-share market,domestic and the international macroeconomic environent and so on. In the market, investors will form their own expectations and adjust investment strategy according to the history of the market performance and current situation. When the market in the rising stage and releases the positive signal, investors are more optimistic, their confidence increased. More frequent and active tradings occur, more investors are entering capital market, conversely it comes the contrast.The empirical regression analysis result shows that there is no "reversal effect" between comprehensiveinvestor’s sentiment index sequence and B-share index’s logarithm yield sequence,both in Shanghai B-share maket and shenzhen B-share market.