An Empirical Study Of The Impact Of Investor Sentiment On China's Stock Market Returns

In the nearly 30 years since the establishment of my country's stock market,there have been frequent fluctuations and sharp fluctuations in stock prices,and the market has been extremely unstable.Unlike the mature capital markets of western developed countries,the Chinese stock market is a typical "retail market." Most of the massive individual investors have immature investment concepts,are easily affected by news public opinion,gossip,and their own emotions.They lack objective and rational judgment and control over their investment decisions and behaviors.Based on this,from the perspective of behavioral finance,this article explores the relationship between investor sentiment and China's stock market returns,with a view to guiding the investment practice.This article first combs and analyzes the research literature on investor sentiment,defines the connotation of investor sentiment,discusses the measurement method of investor sentiment,and analyzes and summarizes the characteristics of Chinese investor sentiment.Secondly,this paper draws on the research methods of Baker and Wurgler,selects the weekly data of the four new indicators of the number of new investors,trading volume,turnover rate and average price-earnings ratio in recent years,and uses the principal component analysis method to remove the impact of fundamental factors at the same time,and constructs Compound investor sentiment index to characterize investor sentiment.Both the qualitative and quantitative validity tests show that the comprehensive sentiment index constructed in this paper is effective,and the change in sentiment index is basically consistent with the trend of market fluctuations,and the correlation coefficient is 0.83.Empirical research further shows that there is a definite two-way Granger causality between investor sentiment and stock market returns.The VAR model estimates show that the lagging items of the investor sentiment index and stock market returns have a significant impact on the current items,indicating that the investor sentiment in China's stock market is easily affected,and the investment decisions and behavior characteristics are irrational;optimistic investor sentiment will be Promote higher returns,otherwise pessimistic investor sentiment will reduce returns.Impulse response analysis and variance decomposition also further explored the dynamic interaction between the two,and found that investors have a higher degree of irrationality in the short term,but longterm investment behavior tends to be rational;at the same time,they also find that the stock market price in China cannot It fully reflects the sentiment in the market.In addition,the research in this paper finds that there is a certain difference between the influence of different investor sentiments on the stock returns of different market values.