An Empirical Study Of The Influence Of Investor Sentiment On Stock Market Returns

Traditional financial theory is based on investor rationality and efficient market hypothesis,but financial vision has been frequent since the 1970 s,and traditional financial theory cannot reasonably explain this.Behavioral finance came into being.In this case,investor sentiment is an important part of behavioral finance.Since China's capital market is not yet mature,there are a large number of irrational behaviors.There is no unified viewpoint and method for the definition and measurement of investor sentiment.How to measure investor sentiment and discover its relationship with the market is the direction of this article.First of all,through the principal component analysis method,the A-share new account opening number,turnover rate,drop-off index,price-earnings ratio,and investor activity are five indicators,and the indicators determine whether the indicators respond to investor sentiment in advance or lagging.Finally,a comprehensive index of investor sentiment suitable for China's stock market was constructed.The research in this paper has theoretical support and practicality.Then,this paper carries out the Granger test,and determines the causal relationship between the investor sentiment index and the return of the Shanghai Composite Index,and further studies the mutual influence relationship between the two through the impulse response.On this basis,this paper proposes two hypotheses,which are divided into two: when investor sentiment is in a rising period,compared with large-cap stocks,small-cap stocks will receive excess returns,while large-cap stocks will receive excess returns;when investor sentiment is at In the upswing period,compared to low P/E ratio stocks,high P/E ratio stocks will receive excess returns,whereas low P/E ratio stocks will receive excess returns.Then,by taking the investor sentiment as the independent variable and the Shanghai Composite Index as the dependent variable,the empirical analysis of the two hypotheses shows that both hypotheses can be verified.Finally,based on the research results,this paper puts forward relevant suggestions for regulators and investors.When formulating regulations,regulators should take investor sentiment into consideration and deepen and improve China's capital market;investors should try to avoid emotional investment.Improve professionalism and make rational decisions.