Research On Positive And Negative Feedback Mechanism Of Investor Sentiment And Stock Return

The traditional financial theory is based on the complete rationality of investor behavior,but the emergence of various market anomalies makes the traditional financial theory based on the efficient market hypothesis seem inadequate.Behavioral finance theory believes that investors are irrational and the market is not efficient.Investor sentiment will induce deviation in investment decisions,increase unnecessary risks to investors’ wealth,and also easily cause irrational behavior in the stock market.The change of stock returns will in turn affect investor sentiment.In view of this,it is of great theoretical and practical significance to study the relationship between investor sentiment and stock returns from the perspective of feedback.In order to study the feedback mechanism between investor sentiment and stock returns at the micro level of companies,this paper selects 243 trading days in 2021 as the research sample interval,selects 108 A-share listed companies as the research object,constructs A multiple panel regression model,and uses the stock market public opinion data to construct an empirical analysis of individual investor sentiment indicators.The research reveals that market trading activity plays an intermediary role in the feedback effect of investor sentiment on stock return rate,and the feedback effect of stock return rate on investor sentiment.The main conclusions of this paper are as follows:Investor sentiment has a positive feedback effect on stock return,and stock trading activity plays a partial intermediary role in the positive feedback effect.When investor sentiment is in a high state affected by environmental changes,the stock market actively responds to the change of investor sentiment,and the return rate of individual stocks rises accordingly.Investor sentiment and stock trading activity can feedback the market return rate together,and investor sentiment can independently exert a feedback effect on stock trading activity.The research considers that stock trading activity acts as an intermediary variable in the feedback mechanism of investor sentiment on stock return rate.The feedback mechanism of investor sentiment and stock return has both positive feedback effect and negative feedback effect of individual stock return on investor sentiment,which is a stable mechanism.In the feedback mechanism of investor sentiment and stock returns,the stock market regulates investor sentiment and asset price through feedback,restrains excessive expansion of investor sentiment,reduces excessive rise and fall of the market,investor sentiment and market price change in equilibrium,and the financial system is in a stable state.The conclusion of this study helps to explain the relationship between individual investor sentiment and stock returns in the short-term capital market,provides a new idea for studying individual investor sentiment from the micro corporate level,and clarifies the significance and harm of investor sentiment for all parties in the market.