An Empirical Analysis Of Investor Sentiment And Stock Returns

With the development of finance,investor sentiment began to be accepted and studied by domestic and foreign scholars.But until now,the academic study of investor sentiment are not systematic,especially few scholars have combined with the characteristics of Chinese stock market and investor sentiment to analyze.Therefore,from the theoretical research,investment philosophy and securities regulation,study on the influence of investor sentiment on the stock market is very necessary.This paper describes the research's background and significance at first,then reviews the existed literatures from three aspects:the definition and measurement of investor sentiment,the empirical analysis of investor sentiment on stock returns.Then this paper selects indicators about investor sentiment(exchange rate TURN,consumer confidence index CCI,net earnings account number NIA and PE)and their lag term,these data are standardized and weed out the macro factors,through the principal component analysis,constructing the investor comprehensive sentiment index CSI by SPSS software.This paper analyzes the relationship between CSI and the yield of A-share market in China.First of all,ADF unit root test,followed by Granger Causal Relation Test.Finally,the relationship between investor sentiment and its change and market returns and its change is analyzed by single factor analysis.The results showed that there is a significant positive correlation between investor sentiment and market returns.In other words,when the higher the investor's mood,the higher the market returns,on the contrary,the lower the market returns.There is a significant negative correlation between investor sentiment and market returns fluctuation,and there is no significant correlation between investor sentiment fluctuation and market returns fluctuation.Policy Suggestions are given according to the results of the paper,and the part to be improved are also pointed out.