Asset Pricing Theory And Empirical Study Based On Investor Sentiment

The Capital Asset Pricing Model (CAPM) is by the American scholar Sharpe (1964),Linter (1965) and Mossin (1965), On the basis of Markowitz portfolio theory proposedportfolio pricing method, The model has researched portfolio expected return and the riskof portfolio system in the relationship. At the heart of the CAPM model is only to pricesystem of portfolio risk. Unsystematic risk can be eliminated by enlarging the scale ofinvestment portfolio.Stock market will not be risk compensation.CAPM model forportfolio pricing is based on risk-free return, risk compensation system for portfolio risk.CAPM model mainly in empirical aspect, The problems has existed in the empiricalresearch for showing that CAPM empirical effect is poorer for pricing efficiency problem,the "equity premium puzzle" vision financial markets. So called "equity premium puzzle"has been pointed by Mehra and Prescott (1985) in1979.Using the historical data from1889to1978, the U.S. stock market yields and the risk-free rate has conductedcomprehensive comparison, It has found that the United States there is a Treasury ofhigher stock market returns and lower interest rates the phenomenon of long-termcoexistence, the equity premium is equal to the return on equity minus bond yields, theequity premium is always maintained at about6%, the premium is too high. After thatmany scholars from different Angle explained the “equity premium puzzle”, significantachievements have been found by Epstein and Zin (1989,1991), Campbell and theCochrane (1999). Pointing out that CAPM model cannot explain why the "equitypremium puzzle" is the result of CAPM core assumption: market efficiency and investorrationality is not reality.CAPM model demonstration effect is an important reason for the difference is thatthe optimal portfolio theory of markowitz assumptions in reality almost impossible toeffectively meet. Markowitz portfolio contains only systematic risk portfoliorequirements, unsystematic risk can be eliminated by enlarging the scale of investmentportfolio to; But not the diversified cost into consideration. Investors must consider costof investment diversification and reality.In theory, portfolio contains only systematic risk,excluding unsystematic risk is the condition of stock portfolio contains the number n is infinite. For a certain stock, the condition cannot be satisfied. Is made from realinvestment perspective, the number of shares held by the investor, is often a few stockshold too many stock first is to increase the stock of transaction costs. At the same time,also can't effective portfolio management. For institutional investors, stock portfoliocontains stock quantity will be some more, but there is no guarantee that the portfoliocontains only systematic risk, excluding unsystematic risk.In order to improve the CAPM pricing efficiency, Fama and French (1993) by thewhole market system risk level decomposition to the industry level, three factors modelis put forward. Three factors model took into account the industry risk, system riskrepresentation of the CAPM model to the industry level, partly overcome the limitationsof CAPM replace the system with the market portfolio risk, system risk portfoliochina-africa salvage value still slants big, three factors model has not fully includeunsystematic risk portfolio pricing problem.Behavioral finance the financial psychology into the stock market price earnings andshare price volatility, effectively explaining the "flock effect" of the stock market pricefluctuation and the agglomeration phenomenon. In this paper?Based on Fama and Frenchthree factors pricing model. From the perspective of behavioral finance.Investorsentiment has been taken into the capital asset pricing research,This capital asset pricingmodel has been improved.Constructing Asset Pricing Theory model based on investorsentiment. And examing the influence of investor sentiment to portfolio value. Bycombining the theoretical analysis and empirical analysis, the combination of qualitativeand quantitative research methods. Mainly quantitative analysis, the use of statistical andeconometric model, and use the principal component analysis method, composite indexbuild emotions. Investor sentiment were discussed from two aspects of theory andpractice to the improvement of the capital asset pricing model, analysis and test ofinvestor sentiment effect on capital asset pricing efficiency significantly. Subject belongsto the frontier hot issues in the research field. Theoretical significance lies in the use ofthe Chinese stock market data, test the hypothesis that the traditional finance aboutmarket efficiency is established. Application value is mainly reflected in investorsentiment has significant effect on the CSI300index yield, reveals the investor behaviorhas influence to the Chinese stock market. This paper has important theoretical value and practical significance.This paper studies the main contents include: The first system at home and abroadbased on investor sentiment for asset pricing theory and empirical research, pointing outthe relationship between investor sentiment and asset pricing theory. Secondly, the articleexpounds the basis of the capital asset pricing theory. Third, this paper provides a clearlydefined as investor sentiment, to explain the influence factors of investor sentiment andmeasure. Expounding the method of comprehensive index of investor sentiment. Fourth,on the basis of both Fama and French three factor model, build a model of asset pricingtheory based on investor sentiment, expounding the theory model of hypothesisconditions and construction method. Fifth, To build the sentiment of the empirical assetpricing theory model and the result analysis, and Yale CCER pricing effect of Chinesestock market investor confidence index were analyzed,It has been proved in this paper,The rationality of the sentiment composite index has been constructed. Finally, Tosummarize the full text and the conclusion.In this paper, the full text conclusion andfurther research direction, which are built based on the information, the sentiment ofdynamic asset pricing model, the research of sentiment composite index and strengthenthe investor sentiment theory and nonlinear combination of asset pricing and marketmicrostructure theory.The main conclusions of this paper is1. The sentiment factor has been the biggestinfluence on the CSI300index, The Shanghai A-share index is also significantly affectedby investor sentiment.2. Small-cap index more influenced by sentiment factors.3. Fromthe point of view of investor sentiment influence on industry, investor sentiment on thereal estate industry, non-ferrous metal industry, biological medicine industry, iron andsteel industry has significant differences.4. In this paper, the research conclusion hassignificance difference with foreign research,This article has found that investorsentiment significantly affecting the Shanghai50ETF and the Shanghai180ETF.This paper innovation points are:1. Using principal component analysis get the finalstandardization composite sentiment index.2. On the basis of both Fama and Frenchthree factor model, build a model of asset pricing theory based on investor sentiment3.Innovative discussions, this paper will be based on investor sentiment for Fama andFrench three factor asset pricing model empirical research to market value index, index of different industries, different style and different ETF investment funds, Research oninvestor sentiment for the difference of these combinations.4. For this paper acomparative analysis has been builded on the sentiment composite index of Chinesestock market and Yale CCER confidence on sentiment pricing effect for asset pricingtheory model.