Research On Investor Sentiment And Abnormal Returns Of Stock Prices

The traditional theory of finance identified the investors are rational,that is,the investors sentiment will not affect their investment behavior in general.However,whether the relatively mature foreign developed country market or immature developing market,investors can not meet the traditional theory of finance,in other word,investors have irrational investment.So what is the impactof the change of investor sentiment on China's stock market,whether it will affect the volatility of excess yield?Whether the volatility of China's stock market will affect the change of investor sentiment?To solve these problems,this paper studies the relationship between the change of investor sentiment and the excess return in China stock market with taking the yield of HS300 stock market as the benchmark.Firstly,this paper summarizes the previous researches on investor sentiment and stock market returns.Then,selects six investor sentiment indexes,and through the principal component analysis method,carries on the investor sentiment index construction,and completes the investor sentiment index optimization.Then the data is standardized to study the relationship between the change of investor sentiment index and the excess yield of HS300 index during the whole period.This paper studies the influence of investor sentiment index change on the current HS300 index excess yield by establishing EGARCH(1,1)model.At the same time,it studies the influence of the HS300 excess yield change on the investor sentiment index by using EGARCH(1,1).The study shows that:(1)In the whole period,the change of investor sentiment index has a positive effect on the stock market excess return,and the high investor sentiment will also lead to the increase of the HS300 index excess yield.(2)The change of the excess return of stock market has a positive effect on the fluctuation of investor sentiment.If the excess yield of HS300 stock index increases,the investor sentiment of stock market will also rise.The paper establishes a VAR model to study the relationship between the change of investor sentiment index and the excess return of stock market.The results show that:(1).In the short term,the excess yield has a positive effect on the change of investor se ntiment index.(2).Giving a positive impact to the investor sentiment index will also have a positive impact on the market excess yield.In turn,after a positive shock to the exc ess yield,the investor sentiment index changes from the second period to the sixth perio d,which tends to stabilize.(3).the Granger causality test shows that in the case of a sec ond order lag,the relationship between the change of investor sentiment index and exces s return is two-way causality.