Company Level Investor Sentiment And Stock Price

China’s stock market has happened sharp crashes,especially the sharp rise and fall around 2015 and the sharp "dive" of the index after the outbreak of the new crown epidemic.Although stock price fluctuations are an inevitable normal phenomenon,too sharp fluctuations greatly increase the uncertainty.Investor sentiment has played an important role in crisis.Since individual investors currently account for more than 60%,we use the Non-main Capital Trading Imbalance Index(BSI),from the new perspective of individual investors’ capital flow.This paper focuses on stocks in Shanghai and Shenzhen from 2010 to 2021.We uses the constructed company-level investor sentiment indicator BSI to conduct research and concludes the following conclusions: First,investor sentiment at the individual stock level is significantly negatively correlated with the future short-term return of the portfolio,because when investor sentiment is high,it will continue to buy stocks and raise asset prices,and once the market information is inconsistent with investors’ expectations,it will cause stock prices to reverse,resulting in lower short-term returns in the future;Second,the above sentimental anomalies manifest differently in different companies on the same crosssection,specifically manifested in the fact that the sentiment anomalies are more pronounced in companies with high book capitalization ratios,high institutional ownership ratios and small market capitalization,because investors prefer to "small and broad",like to buy stocks with low market capitalization and high investment value,and because institutional investors are closely connected and have a large amount of funds,emotions are more likely to spread rapidly among institutions,resulting in stock price fluctuations;Third,it is a positive relation between stock crash risk and sentiment.Elevated investor sentiment will exacerbate the risk of a further crash.Based on the above research conclusions,we recognize that investor sentiment plays an important role in China’s capital market,and draw the following enlightenment: First,policymakers and regulators can maintain the stability by raising the entry threshold for investors,cracking down on stock price manipulation,and "cutting leeks".Second,listed companies are the direct stakeholders of stock price fluctuations,so the management should do a good job in guiding public opinion,improve internal control,and avoid the spread of false information,so as to enhance investors’ trust and stabilize their expectations.Third,investors should not only establish a solid sense of risk,assess their own risk tolerance,and enter the market cautiously.It is also necessary to explore their own investment strategies,improve their professional investment capabilities,control emotions when making decisions,and avoid the influence of irrational factors.