The Research On Investor Sentiment Contagion Between China And U.S.Based On Mixed Copula Approach

The study of investor sentiment has attracted much attention since the birth of behavioral finance.A large number of empirical studies show that the influence of investor sentiment on the stock market is very profound,which often causes dramatic changes in the stock market.With the continuous development of network information technology and the gradual progress of regional and global economic integration,the stock market among countries and regions in the world has shown a closer linkage.The stock markets among the major developed economies are changing in the same direction.It makes people think whether there is some direct mutual infection between investor sentiment in different stock markets?Based on the Copula model,this paper studies the infectivity of investor sentiment in China and the U.S.stock market.First,this paper uses the existing investor sentiment index of the U.S.stock market,and uses the principal component method to construct the investor sentiment index of the Chinese stock market.It is found that the investor sentiment in the stock market of the two countries can describe the change of investor sentiment with time respectively.The investor sentiment of the Chinese stock market is more intense than that of the US stock market.Secondly,this paper uses the Grainger causality test to analyze the transmission direction of investor sentiment between the U.S.stock market and the Chinese stock market,and finds out it is not Grainger reason for both stock markets before September 2005;in the period from September 2005 to April 2014,the investor sentiment of U.S.stock market is the Grainger reason for the investor sentiment of Chinese stock market,but the investor sentiment of Chinese stock market is not the Grainger reason for the investor sentiment of the U.S.stock market;in the period from May 2014 to September 2015,investor sentiment of the U.S.stock market and the Chinese stock market is not Grainger reason for each other.After that,this paper constructs the GARCH model of the investor sentiment sequence of China and the United States respectively,and uses the fitting residual after the probability integral transformation to simulate the static single and the mixed Copula model.It is found that there is a certain correlation between the investor sentiment sequence of the Chinese and the U.S.stock market,but it is not very significant in general.In addition,the data shows that both of them have no significant correlation between the upper and lower tail.By fitting and analyzing the time-varying Copula model about the investor sentiment index of the Chinese and the U.S.stock market,it is found that the investor sentiment correlation between the Chinese and the U.S.stock markets fluctuates with the time,reaching the maximum in October 2007.Finally,based on the empirical results,this paper puts forward some countermeasures and suggestions for government departments,the stock market regulator and investors.