The Influence Of Investor Sentiment On The Valuation Of Listed Companies

From the view of behavioral finance,this paper tries to explain the influence by investors’ behavior and sentiment on our stock market.After overview of past literature,we have chosen four independent indicators,such as volume of stock market,turnover ratio of stocks,newly-opened accounts and consumers confidence index.Through several optimization,We pick up Investor sentiment factor with principal component analysis.When we find out that investor sentiment factor and price-earning ratio index earning ratio unsteady using ADF test,we set up E-G model.Luckly,We found that there is a cointegration relationship between that two variables.On the basis of that Relationship,we set up this variables Granger causality tests.At last but not least,we begin Multiple linear regression test.It turns out that price-earning ratio does Granger Cause investor sentiment factor as investor sentiment ratio does not Granger Cause price-earning ratio.P/e ratio significantly affects the investor sentiment.Forthermore,the change of P/e happened before the change in investor sentiment.Actually,Investor sentiment does not influence the p/e ratio.In addition,through multiple linear regression,the empirical shows that the change of p/e ratio has high correlation with the company size and the company size depends on the growth of the company itself performance level.So the growth of the company itself performance decide the level of company p/e ratio.Finally,There is no impact between p/e ratio and Beta or required rate of return.Indirectly proves that the present situation of the stock market in China is not in conformity with the efficient market hypothesis.CAPM model and Gordon dividend growth model does not apply to China market.