| Since the 1990 s,the research on investor sentiment has become an important part of the research in the field of behavioral finance.Compared with the efficient market and general equilibrium of standard finance,behavioral finance believes that the price of stock market often deviates from its basic value,that is,the market is not completely efficient and balanced,because investors are limited rational and market arbitragers have limited arbitrage ability.Investor sentiment is caused by the cognitive deviation and psychological deviation of investors,which will affect the behavioral decision-making of investors and thus have a systematic impact on the stock market.For China's stock market,since the establishment of the Shanghai and Shenzhen stock exchanges in 1990,China's stock market has developed rapidly and become the world's top three stock markets.At the same time,due to the late start of China's stock market and the large proportion of individual investors,there is still a big gap between China's stock market and the mature western markets.Investors are often irrational and prone to be affected by emotions.Therefore,China's stock market often occurs a large market fluctuations,and has a significant herd effect.The standard financial theory can not fully explain the sharp fluctuation of China's stock market,while the investor sentiment theory can better explain the phenomenon of the rise and fall of China's stock market.This paper reviews and summarizes the literature on the definition and measurement of investor sentiment and its impact on stock returns,and on the basis of selecting the A-share market turnover rate,closed-end fund discount rate,A-share market average P/E ratio,new investors opened accounts,consumer confidence index and baidu search index of keywords these six indicators as agent of Chinese stock market investor sentiment indicators,using principal component analysis synthesize these six indicators,A comprehensive index,to measure of Chinese stock market investor sentiment.In view of the impact of investor sentiment on stock returns,this paper makes relevant analysis from the theoretical and empirical aspects.In the theoretical analysis,the influence mechanism of investor sentiment on stock returns is discussed mainly from the aspects of the overall effect and cross-sectional effect of investor sentiment and the asymmetric effect of investor sentiment under different market conditions.In empirical study,this article will be on June2006 to September 2018 the stock market is divided into seven bull market and bear market cycle,first through the Granger causality test to understand overall causation of investor sentiment and stock returns,then by building the single factor and join the Fama-French three factor of multi-factor model empirically the bull and bear market condition of stock affects overall earnings changes in investor sentiment.Next,the GARCH(1,1)model isconstructed to test the impact of investor sentiment volatility on the overall return volatility of Chinese stocks.Finally,this paper examines the impact of investor sentiment on different types of stock returns under different market conditions by constructing arbitrage portfolio.The results show that there is a two-way cause-and-effect relationship between investor sentiment and stock returns,and investor sentiment changes have a significant positive impact on stock returns.Bear market investor sentiment changes have a greater impact on overall stock returns than bull markets.In a bull market,investor sentiment volatility will aggravate the overall stock yield volatility,while in a bear market,investor sentiment volatility will reduce the overall stock yield volatility.The cross-sectional effect of investor sentiment is different in different markets.Stocks with high P/E ratio in bull market are more sensitive to the change of investor sentiment,while stocks with small companies,high price-to-book ratio and high stock price in bear market are more affected by the change of investor sentiment. |
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