Research On The Impact Of Investor Sentiment Against Stock Return And Volatility

Traditional financial theory assumes that market is efficient, in another word the priceof the product can fully reflect the price of the product history information, which meansthat investor sentiment has no effect on the market price.But there are many anomalies inthe financial market the validity of the theory can not explain.So behavioral financeproposed the concept of emotion in order to explain anomalies in financial markets.Behavioral finance means that the market is limited arbitrage.Empirical results show thatinvestor sentiment has a significant impact on the market yields and volatility, this paper putforce on investor sentiment, helping testing the effectiveness of the market.From theperspective of practical significance, if the factors affecting investor sentiment market yieldsand volatility, we have more research in the future tend to investor sentiment on financialmarketsIn this paper, Yale-CCER investor confidence index as explanatory variables, throughempirical analysis econometric model to test whether investor sentiment has a significantimpact on stock market returns and volatility. The full text of a total of five parts. Whereinthe first part is the introduction, this paper describes the background, significance analysisand review of the relevant literature at home and abroad, a simple introduction to the maincontent and research methods, and finally illustrate the innovative and less paper place. Thesecond part introduces the theory of investor sentiment about the relationship between stockreturns and volatility of the classical theory of knowledge section. The third part of theeconometric model was constructed empirical test of the impact of investor sentiment on theShanghai A-share market yields and volatility. The fourth part describes the ability ofinvestor sentiment index in predicting market yields and volatility rate, reflecting the lagtime on its influence still exists. The last part is the full text of the conclusions, according tothe circumstances of this paper demonstrate some constructive suggestions, and made theprospect of future research. Through empirical research, the full text of the study include thefollowing three aspects:First, investor sentiment has a significant impact on the stock market yields, changes in investor sentiment index will soon be reflected in changes in yield, and reflected in thedifferent stages of the features vary. Specifically, the market rose stage, the impact ofinvestor sentiment on the stock effect the most significant gains, while the broader marketfell sideways phase and stage, the impact of investor sentiment on stock returns is relativelysmall.Secondly, there is a significant impact on the relationship between investor sentimentand stock volatility. Investors irrational decision easy changes in investor sentiment, and bychanges in investor sentiment will soon be reflected fluctuations in earnings. And yieldssimilar to affect investor sentiment on the stock ’s volatility also has a stage, a differentsentiment will cause varying degrees of volatility and changes in direction.Again, the current trend in investor sentiment can predict future stock returns, volatility.That investor sentiment will be interpreted variable hysteresis effect to a certain extent, ofcourse, with the passage of time, this lag effect will become increasingly weak.The innovation of this article:1by dominant sentiment indicators, focusing on changesin investor psychology and investor sentiment, investor sentiment in the test samples toensure adequate conditions for stock returns and volatility are having a significant impact.2investor sentiment on the future use of the yield and volatility were predicted, with somereference value for investors and regulators.However, due to Yale-CCER Investor Confidence Index survey for institutions andindividuals, so it is a comprehensive index, completely rational investor sentiment index forinstitutional investors, rather than rational investor sentiment index depends on theindividual investor, it is we should try to investigate the situation of individuals andinstitutions studied separately in future studies investigate the effects of two-way rationaland irrational investor sentiment on the stock market.