The Influence Of Investor Sentiment On Risk And Return Relationship In China's Fund Market

Traditional finance believes that investors are completely rational.Investors will buy assets when the price of the asset is lower than the intrinsic value,and sell the asset when the price of the asset is higher than the intrinsic value,in the buying and selling.In the end,the unity of price and intrinsic value will be achieved,and the relationship between risk and return in the market will always be positively correlated.However,traditional finance,which assumes the full rational behavior of investors,cannot explain the market vision existing in the capital market,and thus has been widely questioned.Because in the actual investment,the investor's investment behavior is not completely rational,it will be affected by irrational factors,which has the emergence of behavioral finance.Therefore,the scholars of the behavioral finance school introduced when studying the securities market.Some irrational factors,the most important of which are emotional factors,they believe that in addition to the price of securities will be affected by value,irrational factors such as emotions will also have an impact on prices.Compared with the mature securities market in developed countries,the main body of investors in China's securities market is individual investors.Compared with institutional investors,individual investors are more susceptible to emotional influence when investing.In the context of individual investors in China's securities market,the investment behavior of individual investors is more susceptible to emotions,which makes investor sentiment have a very large impact on the changes in the market.Reasonable measurement of investor sentiment,and analysis of changes in investor sentiment will not affect the changes in the fund's market yield and the relationship between risk and return in different investor sentiment funds,which can better understand investors' investment behavior.And to make better suggestions for investors' decision-making,so this paper constructs the investor compound sentiment index through PLS method,and finds the causal relationship between investor sentiment and market return rate through Granger causality test,and uses GARCH(1,1).The model predicts the volatility of the rate of return and examines the relationship between the risk and return of the fund market in different emotional periods.The empirical results show that the change of investor sentiment will lead to the change of market return rate.The change of market return rate is mainly driven byinvestor sentiment;in general,China's fund market shows a significant positive correlation between risk and benefit.And changes in investor sentiment can lead to changes in the relationship between risk and benefit in the fund market.Investors must pay attention to factors such as investor sentiment in the investment process.Therefore,in order to avoid the adverse effects caused by the excessive fluctuation of investor sentiment to the stable operation of the securities market,to ensure the healthy and stable development of the Chinese market,and to improve the pricing efficiency and operational efficiency of the market,its primary task must continuously strengthen the education of investors.Training,reluctant investors' skill level and investment knowledge reserve,vigorously develop qualified and regulated investors,and build a good good capital market trading atmosphere and investment environment.