Construction And Analysis Of Short-term Timing Strategies Based On Investor Sentiment

The development of behavioral finance provides us with new ideas for studying some situations in the financial market that cannot be explained by financial systems and the visions that exist in financial markets.Investor sentiment belongs to the field of behavioral finance.Investors sentiment will cause investors to have a perceived bias in the price of the stock that causes the price of the stock to deviate from its base value,that is,investor sentiment has a significant impact on the price determination and changes in the stock market.Therefore,the study of investor sentiment can help investors to better understand emotions,so that investors can more rationally face the volatility of the financial market,and then make rational investment decisions.This article will introduce investor sentiment into quantitative investment,and develop a timed trading strategy to provide new methods for investors to invest.This article first combs the related theories of behavioral finance,and analyzes the current situation of domestic and foreign investor sentiment research.Then select the exchange rate,price-earnings ratio,trading volume,transaction amount,Shibor and other proxy indicators related to investor sentiment related to construct the investor sentiment index.Principal Component Analysis method is used to construct the index.By establishing a VAR model and a Granger causality test,the relationship between investor sentiment and China's stock market index is analyzed to help formulate quantitative investment strategies.Finally,Through the relationship between investor sentiment and the broader market index,quantitative time-choosing strategies based on investors sentiment index were constructed by using techniques of quantitative investments and timing.Evaluate the two strategies from the performance of the two strategies on the Shanghai-Shenzhen 300 index was compared.Draw conclusions.Research indicates,on the one hand,The investor sentiment index constructed in this paper is related to the broader market index in China's securities market.The two are causal relations between each other,indicating that investor sentiment and China's stock market have mutual influence.On the other hand,based on investor sentiment indicators,the two timing strategies presented in this paper are:trend timing strategy and index timing strategy.Through examining the performance of the two strategies on the Shanghai-Shenzhen 300,In terms of earnings,the benefits of both strategies are higher than those of the broader market.Therefore,both strategies can obtain higher returns,and the index timing strategies is higher.In terms of risk,the trend timing strategy has a higher Sharpe ratio and smaller Maximum withdrawal than the index timing strategy,that is,the performance of the trend timing strategy is better when risk is considered.