A Research On The Interaction Relationship Of Pricing Effects Between Macroeconomic Risk Factors And Investor Sentiment

China's stock market has developed for nearly 30 years,and various systems have been continuously improved and developed.With the launch of Shanghai-Hong Kong Stock Connect,Shenzhen-Hong Kong Stock Connect and Shanghai-London Stock Connect,the international status and influence of China's stock market has been increasing.Compared with western developed countries,the various mechanisms of China's stock market are not mature,the speculative atmosphere is strong,and the market environment is extremely unstable.Investors are prone to irrational behaviors such as overconfidence,herd behavior,loss aversion,etc.,which is not conducive to the stock market to play its role of resource allocation and risk diversification.In this context,studying the influencing factors and influencing mechanisms of China's stock market will help investors to establish correct investment concepts,provide theoretical and practical basis for their investment decisions,and provide some reference for government departments and regulatory agencies to formulate policies.The CCAPM model,the heart of the mainstream asset pricing theory,is a generalization of CAPM,Fama-French multi-factor and ICAPM,which has good expansibility and avoids some limitations of the early theory.The CCAPM model,using the macroeconomic risk implied in consumption or consumption data as the pricing factor,believes that the key risk source driving the pricing of all financial assets is macroeconomic risk,and only macroeconomic risk can obtain a risk premium.Cochrane(2005)simplifies the CCAPM model and proposes the SDF pricing framework in which the stochastic discount factor is a function of consumption growth rate.On this basis,domestic and foreign scholars have conducted empirical research,but the empirical results are mostly not good.In order to explain these phenomena,financial scholars introduced behavioral asset pricing theory to study,among which investor sentiment was more concerned.Because the assumptions of the mainstream asset pricing theory and behavioral asset pricing theory are different,it is difficult to integrate them into the same framework for analysis.Shefrin(2008)proposed a behavioral SDF that integrates investor sentiment into Cochrane's(2005)SDF pricing framework,arguing that macroeconomic risks and investor sentiment will have an impact on asset pricing in the short term.This paper uses Shefrin's(2008)behavioral SDF as a theoretical support to study the interaction relationship of pricing effects between macroeconomic risk factors and investor sentiment.Through literature review,we find that there are many disputes and divergences in the pricing effect of macroeconomic risk factors,whether at home or abroad,which are mainly related to the assumptions that the real financial market does not conform to the traditional financial theory.Behavioral finance considers the irrational factors contained in investor's asset demand into asset pricing problem,and attempts to provide a positive or descriptive theory for investors' behavior by analyzing the deviations and anomalies of financial market participants in market behavior.In previous studies,the use of some irrational factors to explain market anomalies,or its impact on the pricing effect of traditional asset pricing theory is mostly studied,such as Yu and Yuan(2011),Stambaugh(2012),while the study considering the interaction relationship of pricing effects between macroeconomic risk factors and investor sentiment is less.For the study of the interaction relationship of pricing effects between macroeconomic risk factors and investor sentiment,this paper selects A-shares market's stocks from January 1997 to December 2017 as research samples,and use Stata and Python to perform statistical analysis.First,I use the method of Baker and Wurgler(2006)to construct an investor sentiment index.Then,I use the Consumer Capital Asset Pricing Model and Generalized Method of Moments to estimate the beta series value of the sensitivity of individual stocks to macroeconomic risk by repeated rolling regression in a five-year period,and construct high-risk and low-risk portfolios according to the size of the beta value to explore the pricing effect of macroeconomic risk factors.Finally,I divide investor sentiment into optimism and pessimism,and use panel data analysis,control variable analysis and predictive regression analysis to study the interaction relationship of pricing effects between macroeconomic risk factors and investor sentiment.The main conclusions drawn from the study include:(1)Following the pessimistic period,the return spread between high-and low-risk portfolios should be positive;(2)Following the optimistic period,the return spread between highand low-risk portfolios should be smaller and even negative;(3)Compared with the optimistic period,the portfolio in the pessimistic period is less affected by investor sentiment,the pricing effect of macroeconomic risk factors is more significant,and the empirical performance of CCAPM model and Fama-French three-factor model is better.(4)Compared with the high-risk portfolio,the low-risk portfolio is less affected by investor sentiment,and the pricing effect of CCAPM model and Fama-French three-factor model is stronger.(5)Behavioral SDF is more suitable for China's stock market than mainstream asset pricing model,that is,macroeconomic risk and investor sentiment should be included in the asset pricing framework.The main innovations of this paper are as follows:(1)Based on the behavioral SDF,the macroeconomic risk factors and investor sentiment are included in the same pricing framework to analyze the interaction relationship of pricing effects between them,which more comprehensively reflects the influencing factors and influencing mechanism of China's stock market.(2)When studying the pricing effect of macroeconomic risk factors,we consider six risk factors at the same time,and discuss their pricing effects during the whole sample period,the pessimistic period,and the optimistic period.Through multi-dimensional comparative analysis,the conclusions can more accurately reflect the pricing effect of macroeconomic risk factors in China's stock market.(3)This paper distinguishes pessimistic period and optimistic period,high-risk portfolio and low-risk portfolio to discuss the pricing effect of investor sentiment,which more comprehensively reflects the impact of investor sentiment,and expands the thinking of asset pricing in China's stock market from the perspective of sentiment.This article still has some shortcomings:(1)When I use the CCAPM model to calculate the sensitivity of individual stocks to macroeconomic risk factors,the choice of utility function is considered less.Although the CCAPM model is more general and avoids some limitations of the early theory,but it is undeniable that the model is controversial in the choice of utility function.If the modified CCAPM model is used,the effect may be better.(2)Due to the difficulty in obtaining some data,this paper uses quarterly data for research which may be insufficient.Considering that the behavioral SDF mainly discusses the impact of investor sentiment on asset pricing in the short term,the results may be more convincing if monthly or weekly data are used.