Research On The Time-Varying Relationship Between Geopolitical Risk,Market Sentiment And Rebar Futures

In recent years,a series of major events such as the Syrian conflict,the trade friction between China and the United States,and the conflict between Russia and Ukraine are worsening China’s geopolitical risk.The irrational psychology of investors and the ineffectiveness of market make the investor sentiment indicator have a better and better application effect.In 2022,the trading volume of commodity futures and options in China accounted for more than 70%of the global total,commodity futures have become a hot asset class for all investors.On this background,it is necessary to research the relationship between geopolitical risk,investor sentiment and commodity futures earnings,and the research will has great practical significance for better risk management and portfolio management.This paper choose the most active rebar futures among China’s ferrous metal system trading to act as the research object.Obtain the log yield indicator based on the main continuous contract closing price.Select geopolitical risk index(GPR)to agent geopolitical risk.Obtain the market sentiment indicator by the following steps:Firstly,use the Python crawler technology to climb the individual investor comments of rebar futures in Oriental wealth website,gain analyst research report and related viewpoint text of rebar futures from the Choice financial terminal and Flush website.Secondly,retrain SnowNLP emotion analysis model based on the self-built corpus of positive and negative text for emotion classification.After evaluating the classification accuracy,bullish indicators are constructed as individual investor and analyst sentiment.Thirdly,weighting the individual investor sentiment and analyst sentiment to gain the market sentiment index of rebar futures.Use trading volume indicator to verify the effectiveness of this sentiment indicator.Geopolitical risk index,market sentiment and yield are the three research variables of this paper.Use Eviews software to do the stability test and BDS nonlinear test of the three variables.After setting the optimal lag order and the model’s prior parameters,use Matlab software to obtain the time-varying parameter vector autoregression model with stochastic volatility.Research the time-varying relation between geopolitical risk,market sentiment and rebar futures earnings during the 2019-2022 period.Finally,test the model robustness by adding variables,and test the conclusions robustness by changing variables.Through analyzing the results of random volatility,equal interval and equal temporal pulse response,gain the following conclusions:(1)During the 2019-2022 period,the volatility of geopolitical risk and market sentiment are negatively related with the volatility of rebar futures yield,and the volatility of these three variables is more time-varying during 2020 and 2021.Compared with the return rate,the market sentiment can quickly digest the impact on volatility from the Macro external environment.(2)The impact between geopolitical risk,market sentiment and yield is usually obvious in the short term,and the impact is time-varying during the four years.Geopolitical risk has greater negative impact on the rebar futures market which is wildly fluctuated,and is more likely to impact market sentiment in the period of large market fluctuation.(3)In time points of the second round of trade friction between China and the US,the outbreak of COVID-19,and the outbreak of Russia and Ukraine,the impact direction of geopolitical risk on market sentiment and rebar futures yield has undergone structural change.The impact time of geopolitical risk on market sentiment is longer than yield.Rebar futures yield has a positive impact on market sentiment.In time point of the second round of trade friction between China and the US and the outbreak of the epidemic,the impact direction of yield on market sentiment has not undergone structural change,and the impact time is longer.