The Impact Of Investor Sentiment On Stock Returns

The main core of financial theory is asset pricing theory.The completely rational assumption of investor behavior is based on the traditional asset pricing theory,but various signs have fully proved that the traditional asset pricing model with the CAMP theory system as the main content has certain deficiencies,and these signs are the mystery of the risk-free interest rate.And the mystery of the stock premium,since then,many experts began to question the efficient market hypothesis.As the performance of the efficient market hypothesis in the securities market becomes less and less explanatory,behavioral finance theory has received increasing attention from financial experts over the years.The basic assumption that behavioral finance theory is based on is that investors are irrational and the market is not efficient.The effective market believes that the news in the market is fully circulated and fully competitive.No one can obtain excess returns based on the level of news.Assets under behavioral finance theory The pricing model is obviously closer to social reality.Some anomalies in the market use asset pricing models under the framework of behavioral finance theory,which is obviously more reasonable.Some anomalies in the market use asset pricing models under the framework of behavioral finance theory,which is obviously more reasonable.The irrational behavior of investors has promoted the systemic risk of the entire securities market to a certain extent.China is different from the mature and developed securities markets in the West.The securities market still lacks effective regulatory mechanisms and risk aversion mechanisms.From this perspective,the characteristics of the researcher It is of great significance for perfecting China's securities market.Investor sentiment theory,as an important and cutting-edge theory of behavioral finance theory,has very practical theoretical significance for supplementing behavioral finance theory.Behavioral finance theory believes that investors in the stock market are extremely susceptible to emotions,which affects the investment behavior of stock investors.Studying the impact of investor sentiment on stock returns can help investors understand the optimal relationship between risk and return and improve The overall quality of China's stock investors provides theoretical guidance for securities practice.It helps policy makers grasp the laws of market operation,understand the market operation mechanism,understand the psychological characteristics of investors,and understand the actual needs of investors.Make theoretical guidance for policy regulation.This article divides investors into institutional investors and individual investors from the perspective of investor groups,explores the impact of different investor sentiments on stock returns,and explores whether individual investors have more irrational sentiment than institutional investors.This article selects the closed-end fund discount rate(CEFD),the first-day IPO return(RIPO),the number of IPOs(NIPO),the number of new investor accounts(NAOBI),the market turnover rate(TURNOVER),and the consumer confidence index CCI)and other 6 recessive sentiment indicators,using the principal component analysis method to formulate a comprehensive market sentiment index,and based on the three-factor model,the market sentiment index is introduced to build a model to distinguish each component from Personal investor sentiment and Institutional investor sentiment,Explore the impact of various emotions on stock returns.We find from the empirical results that there is a clear cross-sectional effect between market sentiment index and market return,and that market return has a positive effect on market sentiment index.At the same time,when we conducted further research,we found that market returns have a significant negative effect on individual investor sentiment,and there is a stupid money effect.When investing in the stock market,investors need to adopt an investment strategy that counters individual investor sentiment.The market returns have a positive effect on institutional investor sentiment,which indicates that institutional investors have more rational emotions than individual investors.