A Study On The Impact Of Investor Sentiment On The Price Discovery Function Of Stock Index Futures Under Different Trading Environments

China’s capital market has been developing for more than 30 years,with continuous deepening of market system reform,and the market scale has jumped to the forefront of the world.However,China is an emerging capital market,and its main characteristics are still an unreasonable investor structure and high market volatility.Therefore,it is necessary to establish a financial derivatives market with good price discovery and risk hedging.Stock index futures are a derivative instrument that can effectively discover stock market prices and hedge risks.As one of the most important functions of stock index futures,the price discovery is the basis for risk hedging,and it is important to study the factors affecting the price discovery to maintain the smooth operation of stock index futures and even the entire capital market.Since the listing of China’s first stock index futures,the stock index futures market has been running smoothly and efficiently.However,after the 2015 stock market crash,the CFFEX imposed a strict trading restriction policy on stock index futures,leading to a near standstill in the market,and scholars have varying opinions on the actual effects of this policy.Since then,as the stock market has gradually stabilized,the CFFEX has implemented four more trading relaxation policies.The implementation of a series of trading policies will inevitably make the market trading environment in constant change,thus affecting the discovery of market prices.Individual micro-behavior is the root cause of all macro-phenomena in financial markets.As a key area of research in behavioral finance in recent years,investor sentiment has been proved to have a significant impact on various aspects of the stock market.The stock index futures market is closely related to all aspects of the stock market.Will investor sentiment affect the price discovery of stock index futures? Will the changing trading environment in the stock index futures market affect the mechanism of investor sentiment in the market equilibrium price? Less attention has been paid to this aspect in existing studies.Therefore,it is of practical importance to study the impact of investor sentiment on stock index futures price discovery under different trading environments.This paper takes the CSI 300 stock index futures and the stock market as the research object,and the research interval is from April 16,2010,to June 30,2022.Taking the implementation of trading restrictions in the stock index futures market and the four relaxations of restrictions as the time nodes,the sample is divided into six periods as before trading restrictions,the period of strict trading restrictions,and from the first to the fourth relaxation of trading restrictions,to investigate the impact and differences of investor sentiment on price discovery in the same market under different trading environments.The paper divides investor sentiment into high and low periods.Firstly,VECM is used to investigate the impact of investor sentiment on short-term price discovery ability;Secondly,MIS model is used to calculate the daily price contribution of stock index futures,and a multiple regression model is further established to investigate the impact of investor sentiment on long-term price discovery ability in each period.The results show that before trading restrictions,due to the presence of a large number of irrational investors,when sentiment is in a high period,the risk of noise trading in the stock index futures market increases,arbitrage trading simply cannot eliminate the impact of noise in a timely and effective manner,the market information efficiency is reduced,and short-term price discovery ability will be weakened;when sentiment is in a low period,even irrational investors will be more cautious and reduce their trading behavior.Therefore,there will be less market noise traders,more rational information traders will dominate the index futures market,and short-term price discovery will be enhanced.After the trading restrictions,the difficulty of speculation and arbitrage in the stock index futures market has greatly increased.When the market sentiment is high,a large number of traders exit the stock index futures market and turn to other less restrictive markets,further reducing futures liquidity and further weakening the short-term price discovery ability;when sentiment is low,investor activity generally decreases,which exacerbates the already scarce liquidity in the stock index futures market and weakens the ability to detect prices.With the gradual easing of trading restrictions,the negative impact of investor sentiment on the short-term price discovery ability of index futures has generally tended to diminish.Finally,based on the findings of the study,this paper proposes relevant suggestions for stabilizing investor sentiment and maintaining the stable and efficient development of the stock index futures market.