Investor Sentiment Caused By Extreme Income And Extreme Volatility

With the deepener and broader researching on the international investor sentiment, the theory becomes the hotspot in the field of international academic research. Recently, the research on investor sentiment mostly concentrated in the emotions and benefits, and volatility. After Lee explained the riddle of closed-end fund discount, many scholars from the perspective of empirical proof investor sentiment and stock expected return and volatility, makes the theory becoming the hotspot in the field of international academic research.Extreme performance of the stock market can often stimulate psychological feelings of investors, but few studies take this into account. At the same time, the presence of emerging market securities operation mechanism and some differences in mature markets, investor sentiment and market performance relationship may also exist some differences. We use China and the United States market’s data to analyze the impact of the two extreme stock market returns and extreme volatility on investor sentiment, and two different market performance and the reasons for this difference. This paper reviewed the investor sentiment theory. Then we selected Chinese and the US market’s data and distinguish between extreme and non-extreme circumstances. We construct a linear regression model for OLS and quantile regression. Finally, we study the impact of extreme returns and extreme fluctuations in investor sentiment. The empirical results show:(1) Chinese stock market displays the obvious emerging market characteristic, while the American market displays the obvious mature market characteristic. That the former is more risk seeking, its risk-return relationship is significantly greater than the latter.(2) The two countries’yield have very different effects on investor sentiment:on the Chinese market, the extreme income and the extreme negative income have the further promoter effect on the investor mood, but the non-extreme earnings for investor sentiment explanation of the role is not clear.(3) Volatility of the stock market between the two countries have different impact on investor sentiment:on the Chinese market, when the investor mood is at the optimistic condition originally, stock market’s any undulation all can have the influence to it, specially while the stock market in the extreme undulation. The American stock market undulation has not explained function to the investor mood, suggested the American market investor cannot sprout the congenial enthusiasm by the stock market risk.Finally, based on the research conclusion to get relevant inspiration, and points out the future of investor sentiment in the field of research mainly focused on:an improved method for measurement of investor sentiment, the improvement of investor sentiment index interval of measurement and waited for the adjustment of the control variables.