The Study On Holiday Effect In The China's Stock Market Based On Investor Sentiment

Fama's "Efficient Market Hypothesis" holds that prices can reflect all available information. However, since the 1980s, in some emerging securities markets, even mature securities markets, there are a lot of phenomenon the EMH cannot explain, consists mainly of the "Equity Premium Puzzle", "Small Company Effect", "Book-to-Market Effect", "Calendar Effect", "Over Reaction", "Under Reaction", and so on. These "Market Anomalies" mean that investors can obtain excess returns through adjusting the trade time and trade strategy accordingly. The analysis on the various anomalies has important theoretical and practical significance to improve the securities market trading system and guide investors'rational decisions.This paper mainly studies the "Holiday Effect" in China's stock market. Select the Shanghai Composite Index to represent the overall condition of Shanghai stock market, and according to the industry classification standard of China Securities Regulatory Commission, choose wholesale and retail industry, transportation and warehousing industry, accommodation and catering industry three industry index, which are closely related to the Holiday Effect, using the ARMA (1,1)-GARCH (1,1) model to make empirical analysis on the above index yield sequence, to investigate the overall holiday effect characteristics of Chinese stock market and the performance of the holiday concept industry index during the Spring festival and National Day. And starting from the theoretical perspective of behavioral finance—Investor Sentiment, with turnover rate as the proxy variable, through the empirical analysis method, test the interpretation of the investor sentiment on the Holiday effect, hope to find out the unique holiday effect in China's stock market and its special reasons.The study found that there exists robust holiday effect in Chinese stock market after controlling the risk factors, not only the Pre-holiday Effect exists in most countries, as well as the Post-holiday Effect, and the performances of different industries are disparate. On the reasons for the holiday effect, we find that investor sentiment is exactly an important source of holiday effect, and the explanatory power of the investor sentiment on the Holiday effect in different industries also has some industry differences and holiday differences.Finally, combining the empirical results and characteristics of China's stock market, face on possible problems, the paper puts forward some policy recommendations for government and regulatory authorities.