Investor Sentiment And Macroeconomic Policies Affect The Stock Market Volatility

A large number of financial market visions cannot be reasonably explained by traditional financial theories,but they can be measured by investor sentiment.Inspired by the large number of irrational factors and macroeconomic policy adjustments in China,this paper aims to research the relationship between investor sentiment,macroeconomic policy and stock market volatility.The paper selects 14 investor sentiment agency indicators,and selects 7 indicators through the investor sentiment screening model.Using the principal component analysis and state space,Kalman filter model to construct a comprehensive index of investor sentiment.During the period,the superiority in construction methods and indicators was proved.Based on the TVP-VAR model,the dynamic influence effects between the three varies are analyzed.The study found that:(1)investor sentiment and macroeconomic policy have a lag time,and there will be mutual influence between investor sentiment and macroeconomic policy.(2)There are more and more rational components in China's stock market,and macroeconomic policies are more and more stable and reasonable.(3)The stock market investor sentiment during the bear market is more difficult to control than the bull market.The macroeconomic policies during the 2008 stock market crash were stronger and more frequent than during the 2015 stock market crash.(4)Both investor sentiment and macroeconomic policies will have an impact on the volatility of China's stock market.The impact of mid-and long-term investor sentiment on the volatility of the stock market is greater than that of short-term investor sentiment;short-term macroeconomic policies can restrain the volatility of the stock market,but in the medium and long term,the volatility of the stock market will increase.Based on the above analysis,the article concludes with targeted investment and policy recommendations from the perspective of investors and the government.