Research On The Influence Of Investor Sentiment On Financial Market Systemic Risk

The global financial crisis in 2008 made countries around the world realize the importance of preventing and resolving systemic risks in the financial market,and have begun to strengthen the measurement and control of systemic risks in the financial market.In recent years,Sino-US trade frictions have continued,and the COVID-19 that quietly broke out in 2020 has caused a huge impact on China’s macro economy.During the COVID-19,the catastrophe risk indicators of my country’s financial system exceeded the warning threshold of short-cycle risks several times.Although chinese COVID-19 has been initially controlled,the asynchrony between the financial cycle and the economic cycle may lead to a lag in the exposure of financial risks.At present,my country’s economic development is facing many uncertainties,so it is particularly important to prevent and control systemic risks in the financial market.With the emergence of behavioral finance theory,the impact of investor sentiment on financial markets has gradually become a research hotspot in finance.Irrational investor sentiment may affect financial market stability and breed systemic risks.Monetary policy is an important tool for the state to regulate the financial market,and it reflects the government’s attitude towards the economic situation.Investor sentiment will change with the adjustment of monetary policy,which in turn affects all aspects of the financial market.Therefore,this article characterizes the financial market systemic risk and investor sentiment by constructing the financial market stress index and investor sentiment index,and selects the Shibor interest rate as a proxy variable of monetary policy.From the perspective of monetary policy,this article conducts an empirical analysis on the time-varying relationship between investor sentiment and financial market systemic risk,and gives relevant policy recommendations.First,referring to previous scholars’ research,this article analyze the influence mechanism of investor sentiment on financial market systemic risk from the perspective of monetary policy and the perspective of direct influence.Secondly,27 basic indicators covering the six sub-markets of banking,foreign exchange,stocks,bonds,finance and real estate are selected to construct the financial market stress index,and the state effect of the financial stress index is backtracked to prove its effectiveness.Then,referring to previous studies,9 objective indicators representing investor sentiment were selected,and the subjective investor sentiment index was constructed by machine learning algorithm,and then the composite investor sentiment index was prepared by principal component analysis method.Finally,establish a VAR model with and without monetary policy participation to analyze the role of monetary policy in the process of investor sentiment affecting the systemic risk of financial markets,and use the TVP-VAR model to analyze the time-varying impact of investor sentiment on the systemic risk of financial markets.The main research conclusions of this article are:(1)The systemic risk of the financial market peaked in 2008,and then generally showed a downward trend,which is in line with the relatively stable chinese financial market in recent years.The systemic risk of the financial market has experienced several shocks,but after a short rise,it has fallen back quickly,which fully demonstrates the effectiveness of chinese prevention and control of systemic risk in the financial market.(2)Monetary policy will suppress the impact of investor sentiment on the systemic risk of financial markets.The empirical results show that,under the action of monetary policy,the impact of investor sentiment on the systemic risk of financial markets is comparable to that without the participation of monetary policy.The fluctuation range is smaller and the fluctuation time is shorter.(3)The empirical results show that the relationship between investor sentiment and financial market systemic risk has time-varying characteristics.Before and during the outbreak of the COVID-19,the positive impact of investor sentiment will increase the financial market stress index,reduce the stability of the financial market,but after the COVID-19 eases,the impact of investor sentiment on the financial stress index is negative,that is,the positive impact of investor sentiment can stimulate the recovery of the financial market and reduce financial market pressure.Therefore,the Chinese government should take into account the level of systemic risk in the financial market and formulate reasonable measures to guide investor sentiment,so as to prevent the possibility of irrational investor sentiment from breeding systemic risks.When the financial market is hit by the COVID-19,the pressure on the financial market will rise rapidly,and it is imperative to alleviate the harm caused by the epidemic to the economy.However,we must also pay attention to whether the liquidity and investor sentiment changes brought about by the loose monetary policy will futher increase the already rising systemic risks in the financial market,and prevent the occurrence of financial crises.