Research On The Relationship Between Investor Sentiment And The GEM Market Stock Price Volatility

Although the GEM market has not been established for a long time,it is an indispensable part of China's construction of a multi-level capital market system.Its superior capital gathering ability has not only brought great promotion to the development of high-tech and high-growth SMEs in China,but also contributed an important force to the development of China's capital market.However,there are still some unfavorable factors in the growth enterprise market in China.The irrational decision-making behavior of market investors such as "excessive trading" and "herding effect" seriously affects the stable development of the market.At the same time,the growth enterprise market frequently fluctuates abnormally.Therefore,it is of great theoretical and practical significance to study the relationship between investor sentiment and return volatility in GEM.In this paper,the number of new accounts,the number of IPOs and the monthly average price-earnings ratio of GEM are selected as objective proxy indicators of the market,and consumer confidence index is taken as subjective proxy indicators.Kalman filter method is used to construct a comprehensive index describing investor sentiment.A GARCH model is established to study the relationship between the lag term of investor sentiment and the volatility of GEM return.The results show that the lag term of investor sentiment and the volatility of GEM market are in the same direction.Investors are in a high mood in this period,and the GEM market returns will have a relatively large increase in the next period.As a result,investor sentiment may affect the expected return level of the GEM market by influencing the volatility of the GEM market.Further,DCC-GARCH model is used to explore the correlation between investor sentiment and GEM volatility.The results show that there is a significant correlation between the two.When studying the development trajectory of dynamic correlation coefficient,we find that the fluctuation range of dynamic correlation coefficient is small,and the higher the volatility of GEM,the lower the dynamic correlation coefficient,which is different from that of mature market.The reason may be that the GEM market in China has been established for a short time,the government's intervention in capital market and the differences between legal mechanism and foreign capital market.Finally,this paper puts forward some suggestions according to the research conclusions.The government and market supervision and management institutions should improve the information disclosure system,improve the level of supervision and management,and establish and improve the legal system.We should improve the overall level of the GEM market,ensure the sustained and stable quality of listed companies,open up a variety of investment channels,and innovate investment tools at different levels of risk.In addition,it is necessary to help establish investors' correct investment concepts and improve their cultural level,so as to cultivate investors' ability of rational analysis and independent decision-making,and reduce the systemic risk brought by investors' sentiment.