Price Reactions To Earning Announcements In China's A-share Market: Based On Investor Sentiment

In recent years, behavior finance has been developed rapidly. Academic community researched about investor behavior preference, investors heterogeneous beliefs influence on the investment decisions and achieved some results. The development of behavioral finance, making financial research can be done from a new perspective, through a combination of investor sentiment to study the influence of the stock market. To a certain extent, solve some of the vision problems of traditional financial theory difficult to interpret.In this paper, we consolidated and expanded the research model on the basis of existing, and referenced the research results of scholars. Combined with the actual situation of China's stock market, using principal component analysis to construct an investor sentiment index which conforms to China's Shanghai A-share stock market. Then chose the shares which listed in Shanghai a-share before 2000 as samples. Then selected the 2000-2014 annual earnings announcement date as the event day, to study of the relationship between investor sentiment and earnings announcement reaction. Evidence suggested that investor sentiment could influence the stock price around earnings announcement day. During the period of earnings announcement day, for the good news(unexpected earnings is positive), in the period of investor sentiment, earnings announcement than emotional response to market downturn more active. For the bad news(unexpected earnings is negative), in the emotional downturn, earnings announcement period market reaction to good and bad is not symmetrical. The influence of bad news sharper and the share price volatility larger. And after the earnings announcement period for a period of time, investor sentiment impact on stock prices still exists, in high sentiment period, good news prompted stock prices continue to rise, but maintain shorter; while in low sentiment period, bad news to promote the stock prices continue to drift down, and keep for a longer time.