Investor Sentiment To Study The Influence Of Stock Market Returns

Due to the insufficient ability of traditional finance theories such as "rational man" and "efficient market hypothesis" to explain many financial asset price anomalies,behavioral finance emerged at the historic moment.Investor sentiment is one of the important contents of behavioral finance,and the relevant theories such as "noise trading" and "herd effect" have effectively explained the actual operation of financial markets.Since the 1990 s,it has become a hot topic in the field of behavioral finance to study the relationship between investor sentiment and the stock market.This paper starts with the construction of proxy variables of investor sentiment and its effectiveness analysis,and finally selects the monthly returns of CSI 300,CSI 500 and CSI 1000 constituent stocks as samples to study the impact of investor sentiment on stock market returns.Firstly,the research hypothesis is put forward based on the theoretical analysis of efficient market hypothesis,noise trading,herd effect and so on.Secondly,the principal component analysis method is used to construct an effective investor sentiment index including market transaction data and text sentiment data.Then,the structure vector autoregressive model(SVAR)and Fama-French multi-factor model were established to empirically analyze the impact of investor sentiment on stock market returns.The results show that(1)Composite index of investor sentiment,which includes market transaction data and text sentiment data,is more effective in describing the overall market sentiment than using the two alone;(2)Investor sentiment can significantly positively affect stock market returns during the period,but such influence will gradually weaken and disappear after a period of time;(3)The yield of large-cap,medium-cap and small-cap stock markets is affected by investor sentiment to a greater degree and for a longer time.(4)The excess return of stock portfolios with small market value and low book-to-market ratio is significantly affected by investor sentiment;(5)The stock portfolio returns of emerging industries in the stage of rapid development have a significant positive impact on investor sentiment.According to the research findings,some suggestions are put forward.The capital supervision department can take the lead in establishing authoritative market sentiment warning indicators,and the supervision efforts should be tilted towards stocks of small market capitalization,low book-to-market ratio and emerging industries.Market investors should improve their ability to reduce emotional intervention.