Study On The Influence Of Investor Sentiment On The GEM Index

With the improvement of the financial theory system and the diversification of research perspectives,some scholars began to explain the representation of financial markets from the perspective of psychology,which accelerated the cross-integration of psychology and finance,and then led to the birth of behavioral finance.Behavioral finance is a synthesis of applied psychology,emotional psychology,investor's psychological preference,cognitive psychology and other disciplines.It not only enriches financial theory,but also explains some market anomalies such as the puzzle of stock premium,calendar effect and reversal effect scientifically.In recent years,the phenomenon of sharp rise and fall in financial markets has often occurred.A large number of studies have shown that investor sentiment is an important factor in the occurrence of such phenomena.Therefore,on the basis of deepening the understanding of financial theory,combined with the characteristics of investor sentiment in China,this paper uses statistical methods to study the impact of investor sentiment on GEM index.On the basis of consulting relevant literatures at home and abroad,this paper constructs a writing framework,summarizes the basic theory of investor sentiment,and deeply analyses how investor sentiment affects stock prices through cognitive bias and limited arbitrage channels.Firstly,referring to the classical BW index,this paper initially selects the discount rate,turnover rate,P/E ratio,the number of new investors and margin balance of closed-end funds in the period from January 2014 to December 2018,and creatively adds subjective proxy variable(the best analyst index of new wealth)as the proxy variable of investor sentiment,which is verified by the index,added "lag" variable and excluded macro-factors.Through the process of factor influence and dimensionality reduction by principal component analysis,we can get a simplified and comprehensive investor sentiment index.Then,using the GEM index as the research object,through the stability test,VAR model construction,Granger causality test,impulse response and multiple regression,the impact of the comprehensive investor sentiment index on the GEM index is studied.The results show that: firstly,investor sentiment is the one-way Granger cause of GEM index in China's securities market;secondly,the impact of investor sentiment changes on GEM index lags behind;thirdly,the impact of investor sentiment on GEM index is inconsistent under different market conditions.Based on the above research contents and results,this paper puts forward policy recommendations to reduce the risk of China's stock market for investors and regulatory authorities.