Investor Sentiment And Stock Market

China's stock market has experienced several big changes in recent years,and the investor sentiment has playing an important role in the stock market's volitity. In order to further understand the effects of investor sentiment on the stock market, we divided investor sentiment into individual and institutional in vestor's sentiment. Based on comparing interaction of two types of investor se ntiment,we applied the research of relationship between investor sentiment an d the stock market of China. In this paper, we studied the status of individual and institutional investor sentiment in the stock market, and compared the imp act of individual and institutional investor sentiment on stock returns and volat ility in China's stock market.This paper refered to the previous research, making the number of new a ccounts of investors entered the market as investors sentiment in the initial m easure, and as a distinguished sentiment index of institutional investors and in dividual investors. In order to further study the relationship between investor s entiment, we divided investor sentiment measurement cycle into short-term and medium-term, and used the multivariate regression analysis to remove the influ ence of macroeconomic factors and market factors respectively, and setted the resulting residuals as irrational sentiment in the short and medium term's indiv idual and institutional investors. In short and medium term measurement cycle,use the polynomial distribution lag model (PDLs) and Granger to study the m utual influence mechanism between the two types of emotion.In terms of the influence of investor sentiment and stock market returns,we used the vector autoregressive model, the impulse response function and v ariance decomposition to understand the impact of individual and institutional investors sentiment on stock returns in the mid cycle; then we introduced lagg ed investor sentiment to VAR-GARCH model, further clarified the impact of t he personal and institutional investor sentiment to A shares of volatility, and c aptured volatility mode, with comparing the difference of impact.The results show that the new investor accounts as the initial investor se ntiment index has empirical significance. Individual investor sentiment and inst itutional investor sentiment are related to the lagged sentiment,the lagged sent iment level will significantly affect the current investor sentiment. From the sh ort-term measurement cycle, the individual investor sentiment will have an im pact on the institutional investor sentiment, but institutional investor sentiment does not have significant affect to the individual investor sentiment, the degre e of interaction between the two types of sentiment are asymmetric. From the perspective of the mid cycle, the impact of individual and institutional investo r sentiment is mutual, will significantly affect each other. In addition, two typ es of investor sentiment allaffect the stock market returns and volatility, but th e impact of institutional investor's irrational sentiment on stock returns and vo latility is more significant.Themarket also has lever effect, the level of market volatility when the individualand institutional investor is psychologically pessi mism is greater than the degree of volatility when investor is optimism.