Research On The Impact Of Investor Sentiment On China's Stock Returns

Since the establishment of the Shanghai Stock Exchange in 1990,the formal establishment of China's securities market has been announced,and has developed rapidly during these three decades.However,compared with mature markets with a history of hundreds of years in the West,China is still an emerging market.There are still many deficiencies in the legal system and the composition of investors.Investors are mainly retail,and investment transactions are likely to change under the interference of emotions.Be irrational.At the same time,compared with institutional investors,it is difficult for individual investors to receive more effective information.The number of channels of information and the speed of acceptance are significantly less than institutional investors,which leads some investors to blindly listen to the gossip,making it easy to make irrational judgments.And decision making.In addition,due to the existence of irrational herd effect and insufficient supervision,irrational emotions are very easy to spread among market participants,and it is likely to cause large fluctuations in the market.China's stock market has skyrocketed and fluctuated,and traditional financial theory cannot be used to explain it well,while behavioral finance,which focuses on investor psychology,can make up for this deficiency.In real life,investors cannot be completely rational investors,and the judgments and investment decisions they make cannot be completely rational.The investor sentiment in China is particularly obvious because it is dominated by retail investors.Therefore,the introduction of investor sentiment can be a good fit for China's reality,provide a new perspective for the study of market returns fluctuations and explain financial anomalies,so as to better improve China's securities market and avoid the financial crisis.First,this article summarizes the literature on the definition of investor sentiment,related models,measurement methods,and the relationship with stock returns.With reference to the methods used by foreign scholars to construct comprehensive indicators,because China's national conditions are different from Western countries,objective indicators have selected monthly financing balance,monthly trading volume,monthly Hang Seng AH share premium index,monthly financing balance,and monthly turnover rate.Subjective indicators are selected.China Securities Investor Confidence Index,a new index formed by excluding these five indicators from the macro factors,uses the principal component analysis method to construct a comprehensive index of investor sentiment,and then on the one hand observes the trend of the constructed index and the Shanghai Stock Index through images,on the other hand Calculate the correlation between the two to judge the validity of the constructed index.Secondly,explore the relationship between indicators and stock returns.One is to determine the causal relationship between the two in different periods.The other is to do a regression analysis of investor sentiment and stock returns.Explore the classic three-factor model and add sentiment index factors.In the multi-factor model,the degree of fit of the model and the correlation between the two,and then use the indicative function to classify emotions,and explore whether the impact of high or low emotions on the rate of return is also different.The third is to introduce two kinds of trading strategies,study adding emotions in different market conditions for reference,and choose the right industry to carry out suitable trading strategies to maximize returns.The final research results show that the constructed investor sentiment index fits the trend of the Shanghai Stock Index very well and is therefore effective.It is found in the causal relationship that there is a two-way causal relationship between the two during the sideways period.Stock returns will affect investor sentiment during a bull market,and investor sentiment will affect stock returns during a bear market.In the factor model,investor sentiment has a significant impact on China's stock returns.The four-factor model with the introduction of sentiment factors also has a higher degree of fit;after the introduction of the indicative function,it is found that the increase in sentiment on the stock return is less than the decline The reduction of stock returns by sentiment;when the entire market is in different periods,according to investor sentiment as a signal to choose the industry for stock trading,can better improve the yield.In short,the introduction of investor sentiment into the classic model can increase the degree of fitting of the model.At the same time,it can understand the changes and characteristics of sentiment and yield.Investor sentiment is included as an index to measure the market.China's regulatory authorities This can better improve relevant laws and policies and strengthen supervision of market sentiment,improve the relevant information disclosure system,encourage and develop institutional investors,and also use artificial intelligence and other technologies to simulate investor sentiment fluctuations in real time to appease investment The uneasy emotions of these people guide rational investment,promptly resolve potential market fluctuations,and guide the healthy development of China's securities market.