Research On The Impact And Prediction Of Pessimism On Stock Return Volatilit

Volatility is a measure of the uncertainty of the asset return,and improving the forecasting ability of volatility is beneficial to asset pricing,hedging and risk management.The development of behavioral finance makes the research on investor sentiment and stock market volatility become a hot topic.Retail investors account for a large proportion of our securities market,which is full of short-term speculative behavior.Complex emotional factors have a greater impact,and the "negative bias" in psychology indicates that people are more sensitive to negative news.Therefore,this paper combines investors panic sentiment with realized volatility based on intra-day high-frequency trading data to study the impact of panic sentiment on stock market volatility and its forecasting ability.It is conducive to investors’ rational analysis of market information and data and more accurate volatility prediction.In this paper,by constructing the investor panic sentiment index from January 4,2012 to December 30,2022,we study its influence on the volatility of the Shanghai Composite Index and its forecasting ability.The research content of this paper mainly includes three parts,namely,the construction and test of panic sentiment index,the impact of panic sentiment on volatility and the prediction of panic sentiment on volatility.The following conclusions can be drawn from the research: First,the panic sentiment index constructed based on the daily search volume of panic sentiment words determined by Baidu search index has a significant negative correlation with the current stock return rate and a significant positive correlation with the future stock return rate,that is,the panic sentiment has a reverse effect on the return rate.Secondly,for companies with small scale,high risk and poor profitability,which are difficult to be objectively valued,they are more susceptible to panic and the negative impact lasts longer.This result proves that the panic sentiment index constructed in this paper is effective and can represent investor sentiment.Second,under the condition that the panic sentiment index is effective,the TVP-VAR model is constructed to study its impact on volatility.It is found that when the panic sentiment is under positive impact,the volatility of the Shanghai Composite Index will also produce positive impulse response,that is,the rise of the panic sentiment will aggravate the volatility of the stock market,and such volatility will be more obvious in the short term.Third,under the positive influence of panic sentiment on volatility,HAR-RV model is constructed to study its predictive ability to realized volatility.The results show that compared with other models,the volatility prediction model with panic sentiment has better in-sample and out-of-sample predictive ability and significant economic significance.After the robustness test,all the conclusions are still tenable.Finally,the research of this paper aims to verify the applicability of behavioral finance theory in our stock market,and provide reference for investors to predict stock market volatility,financial regulators to stabilize market sentiment and prevent financial risks.