The Impact Of Investor Sentiment And Global Contagion On Chinese Stock Market

Since the establishment of Shanghai Stock Exchange in 1990 and Shenzhen Stock Exchange in 1991,Chinese Stock Market has experienced several huge turbulence.In recent years,other capital markets also have experienced several irrational prosperity and panic as well.Standard financial theories can't explain the phenomenon,and more and more scholars begin to rethink.Behavioral finance which put forward the view of investors only bounded rationality is in this context came into being.Behavioral finance mainly explains the various visions by analyzing the psychological factors that behind investors' actual investment and decision-making behavior.Investor sentiment is one of the focuses of behavioral finance.It is widely believed that the stock market is our country macroeconomic "barometer".Similarly,investor sentiment can be likened to the "wind vane" of the stock market.Therefore,whether for investors or government regulators,it is important to research the impact of investor sentiment and global contagion on Chinese Stock Market.After cataloging present researches at home and abroad,this paper selects the CSI 500 Index P/E ratio,CSI 500 index price-to-book,turnover and volatility as indicators,and use the principal component analysis method to construct the composite investor sentiment index.The sample interval is from January 19,2007 to July 22,2016.The results show that there is a significant positive correlation between investor sentiment index and Chinese stock market.Further more,investor sentiment index is one-way Granger cause of the stock index.That is to say,the last investor sentiment index has the ability to forecast the current stock market.Secondly,this paper distinguishes for global and local investors sentiment to analyze the impact on Chinese stock market returns.Investor sentiment is contagious.International investor sentiment can predict Chinese stock market returns.Compared to the medium and long-term,response of stock market returns to global and local investors sentiment is more greater.Finally,this paper concludes that revelation and puts forward some research prospects.