The Influence Of Investor Sentiment On The Returns Of Securities Market

Traditional theories study the securities market on the premise of “efficient market hypothesis” and “rational assumption”.However,with the deepening of research,more and more “financial anomalies” cannot be explained by these theories.At the end of the 20 th century,some scholars took a new approach to combine psychology with economics to conduct economic research from the perspective of human behavior.With the development of behavioral economics,“ Overconfidence ”“ Prospect Theory ”“Endowment Effect”has been put forward one after another.Most scholars begin to realize that investor sentiment has a significant influence on the stock market.Taking investor sentiment as the entry point,this paper explores the operating mechanism of China's securities market and studies the influence of sentiment on the return of China's securities market.It has strong theoretical value and practical significance.This paper reviews the origin and development of traditional finance?the proposal of “efficient market hypothesis” and its limitation.The paper focuses on the latest research of behavioral economics and“prospect theory”.From the investor psychology decision-making process to analyze the emotion-return transmission mechanism.On the part of literature review,the paper sorted out the theoretical views of domestic and foreign scholars on three issues,including the definition of emotions,the construction of emotional indicators and the influence of emotions on the return of securities.In the empirical analysis,the paper used principal component analysis approach to construct the final sentiment index SENT,and selected monthly data from 2005 to 2018 for regression analysis.The results show that there is a mutual causality between investor sentiment and the return of the securities market,but the sentiment is in a dominant position.Further,from the perspective of definition,the paper constructs the index of value stocks,growth stocks and speculative stocks.Through the impulse response function and variance decomposition,it is found that the rate of return has a lag effect and the return of three types of stocks has a self-enhancement effect,which gradually declines over time.In addition,under the influence of short-term speculative atmosphere,value stocks are easy to be temporarily abandoned by the market and fall;growth stocks are most consistently affected by impulse;speculative stocks barely react to sentiment.Based on the above analysis,this paper constructs the dynamic SMAD-SMAS model of Sentiment-Return in chapter 5,and puts forward corresponding suggestions from the perspectives of investment mentality,enterprise operation and government regulation.