The Impact Of Investor Sentiment On Asset Pricing

The cyclical changes of economic development can affect the turbulence of stock market, while the cyclical changes in the stock market will also reflect the cyclical change of macro economy. Over the 30 years of Chinese economic reform, the development of stock market and macroeconomic level presents a trend of deviation for 13 years which indicates that China's stock market development is not only derived by fundamental factors. In addition, the period of bull market is very short compared with the long bear market period in China's stock market which also has the characteristics of "excessive volatility", further indicating the existence of non-fundamental factors play a key role in affecting the stock market.Based on the review of the traditional finance pricing theory and behavioral finance pricing theory and the actual situation of China's stock market, this paper analyzes the reason of the financial anomalies in the stock market. The investor sentiment has significant influence on the asset pricing, this paper presents an analysis framework and research system for the influence of investor sentiment on asset pricing based on the construction level, overall effect level, cross-sectional effect level and timing effect level. The investor sentiment asset pricing model is built to explain the forming mechanism of the phenomenon such as "beef short bear long "and" excessive volatility "in China's stock market. This research has theoretical value and practical significance to enhance investor's ability to explain financial anomalies, and also can perfect the system of asset pricing theory of behavioral finance.This paper is organized as follows:(1) according to the actual situation of China's stock market, the main problems of China's stock market such as "beef short bear long" and"excessive volatility" are analyzed. combined with the research status of domestic and foreign scholars, the research framework and research system of the influence of investor sentiment on the asset pricing.(2) based on the research model, through the analysis of the behavior of financial asset pricing theory, the sentiment factors are combined into the asset pricing model. combining theoretical research and empirical analysis of two dimensions, this paper constructs an investment sentiment asset pricing model to analyze the financial asset price equilibrium. The elements of asset price are analyzed, and the influence factor of asset price and the influence and transmission path of the investor sentiment to asset prices are clarified.(3) on the overall effect level, according to the research conclusion formed by investor sentiment index, by using structural vector auto regression model (SVAR), this paper constructs the empirical model of sentiment and stock market investors to analyze the interaction mechanism of those two. Using EViews software to test and analysis of the model, and analyzed the interaction mechanism between investors the overall market sentiment and stock.(4) on the dimension of cross sectional effect, as investors will be affected by market capitalization, profitability or arbitrage restrictions and other factors, the explanation ability of investor sentiment on different stock characteristics of portfolio pricing is different. Based on FF three factor model, the ability of the type of investor sentiment to explain different portfolio pricing is analyzed with the institutional and individual investor sentiment risk factor. The impact of different types of investor sentiment on the asset pricing is in-depth analyzed.(5) on the sequential effects research level, based on the conclusions of investor sentiment index, the structural migration model(SSTAR) has been built. the nonlinear interaction of investor sentiment to stock market at different market stages is analyzed through the sentiment and stock market investors research model. EViews software is used to test and analyze the model, and the impact of investor sentiment on different stages of the stock market is studied.(6) on the cumulative investor sentiment research level, by setting cumulative investor sentiment index with different length of time the Emotional Factors Asset Pricing Model of assets return is been built to analyze the nonlinear effects of cumulative investor sentiment on the stock market.The innovation of this paper is as follows:(1) this paper builds an investor sentiment asset pricing model.Combing different trading period and investor sentiment factor, this paper gives the assets price equation determined by the game equilibrium between informed traders and sentiment traders.This paper adds investor sentiment into the noise of rational expectations asset pricing model, according to the status of China's stock market, builds the investor sentiment asset pricing model. Combining with the analysis of the initial data and the simulation model set, this paper points out the effects of the basic information, the initial asset market and investor sentiment on emotional equilibrium path and asset prices.(2) this paper constructs an asset pricing model with institutional and individual investor sentiment risk factors combined with the characteristics of the industry, the style differences and the differences in exponential form. This paper analyzes the influence of different investor sentiment on different characteristics of the stock price difference.By choosing investment portfolio with different characteristics of the industry, the styles and the exponential form, combining with the institutional investor sentiment index and individual investor sentiment index, this paper uses FF three factor asset pricing model to construct an asset pricing model with institutional and individual investor sentiment factor. This paper longitudinal analyzes the impact of investor sentiment on different industries, as well as horizontal comparison of different investors on the same type of investment portfolio differences.(3) this paper builds a cumulative investor sentiment asset pricing model, and propose the nonlinear effects of different emotional accumulation levels on the stock market asset returns.This paper applies the behavioral finance asset pricing theory to the research on China's stock market development, builds a cumulative investor sentiment asset pricing model to analyze the market value of the scale, time to market, and the volatility of portfolio returns the sale of poor rate. This paper points out the different characteristics of different stock emotional level, under the total difference impact on investor sentiment the return on assets, and describes the cumulative influence of investor sentiment on asset price path.