The Relationship Between Investor Sentiment And P/e Ratio

This paper chooses six indicators of GEM stock market:closed-end fund discount,trading volume,the number of initial public offering,the first day return of initial public offering,the number of new accounts opened by investors and consumer confidence index,and constructs a comprehensive investor sentiment index by using principal component analysis method.Besides,It's also use ARMA-GARCH family model to eliminate some external factors such as trend factors and seasonal factors in the comprehensive investor sentiment index and P/E ratio,and then the correlation analysis and Granger causality test of the residual series of investor sentiment and P/E ratio obtained by the ARMA-GARCH family model are made.The results show that the ARMA-GARCH family model can effectively deal with the autocorrelation and heteroscedasticity of the two variables.Granger causality test found that in the short term,investor sentiment is not the Granger cause of the price-earnings ratio of GEM stock market,that is to say,investor sentiment can not effectively predict the volatility of the price-earnings ratio of GEM stock market in the short term;In the long run,the investor sentiment index and the P/E ratio of the GEM stock market are Granger's reasons.When the GEM stock market is in a rising stage,investor sentiment will be more optimistic,and when the GEM stock market is in a decline stage,investor sentiment will More pessimistic;When investor sentiment tends to be optimistic,the GEM stock market will show an upward trend,and when investor sentiment tends to be pessimistic,the GEM stock market will show a downward trend.The conclusions drawn from the above analysis provide a certain reference value for explaining the relevant economic phenomena of GEM.