A Study On The Volatility Of Convertible Bond Market And Stock Market Based On Investor Sentiment

The rapid development of the national economy has led to the vigorous development of major financial markets.Due to the relaxation of market information,policies and regulations,and the improvement of securities trading technology,the speed and intensity of information dissemination in different financial markets have gradually increased.It is not a closed market that is separated from each other,but shows a certain degree of linkage..In the assumption of classical finance,the market is completely efficient.At this time,the price of financial assets is equal to its value,and the price can reflect all information.However,various financial anomalies in the real market have challenged and questioned the traditional financial assumption.Behavioral finance interprets,studies and predicts the development of financial markets from the perspective of microscopic individual behaviors and the psychological factors that generate such behaviors,and can better explain various market anomalies.Behavioral finance theory believes that investors in reality are not completely rational under the influence of heterogeneous information,and will naturally change their trading decisions due to various factors,of which investor sentiment is a very important factor.Investor sentiment is a concept derived from behavioral finance,and its essence has not yet reached a unified consensus in the academic world.This paper defines investor sentiment as a class of investors with similar emotional tendencies on the basis of predecessors.Processing of the same or similar subjective perceptions formed when the same market information is fed back.The stock market is the largest financial trading market in China,and there are many other financial instruments in the country.Convertible bonds are one of them.It is a hybrid financial instrument with both "debt" and "equity" properties.The bondholders can convert the bonds into bonds of the company’s common stocks at the agreed price at the time of issuance.If the bondholder does not want to convert,they can continue to hold the bond until the repayment period expires to collect the principal and interest,or sell it in the circulating market for cash.It has the characteristics of guaranteed bottom and no cap,which has received more and more attention in recent years.Its dual characteristics make it a bridge between the stock market and the bond market.Based on the above realistic background and research status,this paper uses the 5-minute high-frequency data of China’s stock market and convertible bond market from 2019 to 2020 as the basic samples of the two markets,collects various factors that reflect changes in market sentiment,and constructs a new Sentiment indicator,using the methods of theoretical analysis and empirical testing,to study the impact of investor sentiment on the volatility of the convertible bond market and the stock market.At the same time,based on the current social and economic situation in my country,the investor sentiment is used as a moderating variable to further study the linkage effect of the two markets after adding investor sentiment indicators.The research conclusions of this paper are as follows:(1)Investor sentiment has a significant positive impact on the volatility of my country’s stock market,and there is a lag effect.(2)There is a lag in the impact of investor sentiment on the volatility of the convertible bond market,and sentiment will have a significant impact on the convertible bond market in the next two days,to a lesser extent than the stock market.(3)Market volatility will react to investor sentiment and affect sentiment changes.(4)my country’s convertible bond market and the stock market have a certain linkage,and investor sentiment has a significant regulating effect on it.High positive sentiment will make investors’ asset allocation shift from the convertible bond market to the stock market.The possible research contributions of this paper are: first,starting from the perspective of behavioral finance,focusing on cross-market linkages,making up for the gaps in current research;second,combining literature and empirical evidence to put forward new sentiment indicators,on this basis It verifies the relationship between sentiment and market volatility and enriches the research on investor sentiment.