Construction And Empirical Analysis Of Investor Emotion Index Based On PLS Method

In recent decades,there have been many violent fluctuations in financial markets at home and abroad,and financial market disparities have increased.Whether traditional financial theory is applicable in unsatisfactory market conditions has gradually become suspected by scholars.Researchers have begun.From the new analytical ideas to study the anomalies in the financial market,the formation of behavioral finance has gradually formed.Investor sentiment theory is one of the important branches of behavioral finance.Choosing the appropriate method to quantify investor sentiment and analyzing its relationship with the yield of each securities market has become the direction of many scholars.Because China’s stock market started late,subject to government policy control,there is a certain difference with foreign developed financial markets.Therefore,based on the development characteristics of China’s current securities market,it is very meaningful and necessary to find a suitable method to quantify investor sentiment.After carefully studying the research results of previous scholars,this paper removes some inapplicable indicators according to the characteristics of China’s securities market,combines subjective indicators with objective indicators,and selects China Consumer Confidence Index(CCI)and China’s securities market investment.Confidence Index(SICI),P/E(PE),turnover rate(TR),number of new investors(NIC),volume(TUR),these six indicators as emotional proxy indicators to build China’s investor sentiment index.This paper firstly solves the problem that the proxy index reflects the investor sentiment may be lagging behind by using the more classical principal component analysis method.After eliminating the role of macro factors,a comprehensive index system of investor sentiment was constructed using the less common PLS method.The VAR model and EGARCH(Asymmetric Generalized Heteroscedasticity Model)are used to explore the relationship between the investor sentiment index and the Shanghai and Shenzhen 300 Index and the Shanghai and Shenzhen 300 Index’s yield and yield fluctuations.The results show that based on the above emotional proxy indicators,the investor sentiment index constructed by PLS is consistent with the trend of the Shanghai and Shenzhen 300 Index.The investor sentiment index is very good in the market in "bear market" and "bull market",which can well show the investor sentiment under different market conditions and has good stability.At the same time,this paper also uses the phenomenon of "twin stocks" to test the validity of the constructed index.The results show that the investor sentiment index constructed in this paper is effective.The empirical analysis shows that the investor sentiment index constructed in this paper and the Shanghai-Shenzhen 300 yield are mutually different Granger reasons.This result indicates that there is a significant mutual influence between investor sentiment and the market in the domestic secondary market.When the overall trend of the market is good,investors in the market are in high spirits,and the stock price has a certain degree of deviation.The increase is amazing.When the whole market is in a downturn,the investor’s mood is low,so there will be a continuous down limit.The test results of the EGARCH model show that the impact of bad news on the yield of the Shanghai and Shenzhen 300 Index is greater than that of the good news on the Shanghai and Shenzhen 300 Index.Another angle can be understood as the pessimistic investor sentiment is more obvious than the optimistic investor sentiment on the stock return volatility.At the same time,the results of another EGARCH model show that the impact of the Shanghai and Shenzhen 300 index on investor sentiment is greater than the impact of the broader market on investor sentiment.