Research On The Impact Of Sentiment Interaction Between Retail Investor And Institutional Investor On Stock Price Deviation

At present,there are still many problems in China’s stock market,such as unbalanced investor structure and serious stock market speculation.In particular,the existence of numerous irrational retail investors has an adverse effect on the development of the stock market.In China’s stock market,retail investors have an absolute quantitative advantage,but they are highly irrational.Although the degree of rationality of institutional investors is high,the number of them is small,leading to the relatively insufficient strength of them.In recent years,although the investor structure has been improved to a certain extent,the situation of more retail investors and fewer institutions has not been fundamentally changed.The direct consequence is that the overall irrationality of the market is high,and the stock price deviates from its intrinsic value for a long time,which is harmful to the steady operation of the stock market.These realities are obviously inconsistent with the traditional financial theory.Subsequently,behavioral finance integrates the theories of finance,psychology and behavioral science,uses the irrational characteristics of the market to explain various anomalies in the financial market,and puts forward the theory of investor sentiment.Many studies in the field of behavioral finance show that investor sentiment is a key factor affecting stock pricing.Among the investors in the stock market,retail investors are more vulnerable to irrational sentiment due to their own limitations,resulting in the deviation of the market equilibrium price of stocks from the intrinsic value.Compared with retail investors,institutional investors have more advantages in many aspects,and they tend to show rational characteristics and make more scientific and reasonable investment decisions.How much price deviation will be caused by retail investor sentiment and institutional investor buying sentiment respectively,what is the interaction between retail investor sentiment and institutional investor buying sentiment,what impact will the sentiment interaction between retail investors and institutional investors have on the deviation of stock price,can institutional investors restrain the stock price deviation caused by retail investors through trading and shareholding behavior so as to act as a "market stabilizer" ? These problems are worth exploring and analyzing.In order to solve these problems,this paper brings retail investors,institutional investors and stock price deviation into one framework to study the phenomenon of stock price deviation under the joint action of the two,so as to enrich the existing research results in the field of behavioral finance.In order to solve the problems mentioned above,this paper mainly carries out the research work from the following aspects:(1)This paper combs the existing research,including the impact of investor sentiment and institutional investors on stock pricing,the sentiment interaction between retail investors and institutional investors,and expounds the relevant concepts and theories that can support the research;(2)Based on DSSW model,this paper further divides noise traders into retail investors and institutions,establishes a new noise trader model,and puts forward research hypotheses through model solution and result analysis;(3)Collecting relevant data from wind database,the official website of CSDC and Eastmoney,this paper constructs the sentiment index of retail investors through the method of Principal Component Analysis,calculate the intrinsic value of stocks through the O-F Residual Income Model,and finally verify the research hypothesis of this paper by constructing econometric models.Through the above steps,the research objectives of this paper are basically achieved:(1)Retail investor sentiment and institutional investor buying sentiment are significantly positively correlated with the degree of stock price deviation,and the stock price deviation will increase with the increase of retail investor sentiment or institutional investor buying sentiment;(2)There is a two-way interaction between retail investor sentiment and institutional investor buying sentiment,and the influence direction is negative;(3)Institutional investor buying sentiment plays an intermediary role in the process of retail investor sentiment affecting stock price deviation,and retail investor sentiment can also play an intermediary role in the process of institutional investor buying sentiment affecting stock price deviation;(4)The institutional investor shareholding sentiment plays a negative regulatory role in the process of retail investor sentiment affecting the stock price deviation,which can weaken the stock price deviation caused by retail investor sentiment;(5)According to the research results,this paper puts forward corresponding suggestions for retail investors,institutional investors and market supervision departments,hoping that China’s stock market will continue to operate stably.