| In recent years,with the increasing instability of financial markets,the risk of stock market has attracted extensive attention of researchers.Different from western security markets,there are a large number of retail investors in Chinese security market,and retail investors’ trading behavior is more influenced by investor sentiment.In addition,the performance of Chinese stock market is very easily affected by government policies.In the process of Chinese current economic development and transformation,economic policy uncertainty is a prominent phenomenon.It can not only create potential momentum for economic growth and economic transformation,but also transmit huge risks to the macro economy and financial markets,which exacerbates the impact of irrational market sentiment to a certain extent.Therefore,it is of great theoretical and practical significance to comprehensively consider the role of economic policy uncertainty risk and investor sentiment risk in Chinese stock market.Based on this,this paper measures the sensitivity of stocks to economic policy uncertainty(economic policy uncertainty beta)and the sensitivity of stocks to investor sentiment(investor sentiment beta),incorporates the beta of economic policy uncertainty and the beta of investor sentiment into the asset pricing theoretical model,and constructs an asset pricing theoretical model which considering the effect of economic policy uncertainty beta and investor sentiment beta.This paper explores the impact of economic policy uncertainty beta and investor sentiment beta on asset prices,and empirically verifies the joint impact of economic policy uncertainty beta and investor sentiment beta on Chinese stocks’ returns.In general,this paper includes the following aspects.First,this paper explores the micro-influence mechanism of economic policy uncertainty beta and investor sentiment beta on stock prices.First,we use the general equilibrium model to construct an asset pricing model which is based on economic policy uncertainty beta and investor sentiment beta,and studies the impact of economic policy uncertainty beta on asset prices,the impact of investor sentiment beta on asset prices,and the combined effect of economic policy uncertainty beta and investor sentiment beta on asset prices.The research conclusion shows that when the absolute value of economic policy uncertainty beta is larger and the absolute value of investor sentiment beta is larger,the expected return of stock is lower.Second,this paper empirically analyzes the impact of economic policy uncertainty beta on stock returns.First,we use the rolling regression method to calculate the monthly economic policy uncertainty beta index of individual stocks,and use its absolute value for empirical testing.Through single grouping,this paper finds that the economic policy uncertainty beta of individual stocks has a significant negative impact on stock returns,and also has a significantly negative impact on stock returns for the three-month,six-month and twelve-month holding periods.Furthermore,the study finds that stocks with higher economic policy uncertainty betas tend to be smaller,have higher turnover and lower institutional ownership.Through double grouping and using Fama-Mac Beth cross-sectional regression methods,we prove that after controlling for different characteristics of stocks such as stock size,turnover rate and institutional shareholding ratio,economic policy uncertainty beta is still negatively correlated with stock returns.In addition,robustness tests conducted in different periods of economic policy uncertainty,bull and bear markets,and different stock markets can all draw consistent conclusions.Third,we empirically study the impact of investor sentiment beta on stock returns.First,the monthly investor sentiment beta index of individual stocks is obtained through rolling regression,and its absolute value is used for empirical testing.After grouping stocks by the lagged value of investor sentiment beta,it can be found that there is a negative correlation between investor sentiment beta and stock return,and between investor sentiment beta and stock holding period return.Second,stocks with higher investor sentiment betas tend to be smaller,with higher turnover and lower institutional ownership.In addition,this paper double-groups stock samples according to stock characteristics and investor sentiment beta,and finds that different characteristics of stocks,such as stock size,turnover rate,and institutional shareholding ratio,do not affect the negative relationship between investor sentiment beta and stock returns,and the conclusion of controlling for stock characteristics by Fama-Mac Beth crosssectional regression is also consistent with this.In addition,this paper conducts a series of robustness tests,and the empirical results are not affected.Fourth,this paper studies the combined effects of economic policy uncertainty beta and investor sentiment beta on stock returns.First,through the method of double grouping,this paper proves that both economic policy uncertainty beta and investor sentiment beta have a negative and significant impact on stock returns.In particular,by adding stock characteristics for triple grouping,we find economic policy uncertainty beta and investor sentiment beta have large impact on returns of smaller stocks,stocks with higher turnover,and stocks with lower institutional ownership.Finally,when tested in different periods of economic policy uncertainty,different investor sentiment periods,bull and bear market periods,and different stock markets,the conclusions are still consistent.Overall,this paper mainly focuses on the economic policy uncertainty risk and investor sentiment risk faced by stocks.Through theoretical model research and empirical research,it is proved that both economic policy uncertainty beta and investor sentiment beta have a significant impact on stock returns.The conclusions of this paper enrich the relevant theories about the relationship between economic policy uncertainty,investor sentiment and the stock market,which help us to understand the changing mechanism of stock prices more comprehensively and deeply.In addition,the conclusions of this paper help to improve the level of institutional risk management,and can provide policy-making basis for investors,securities supervision and management departments and related government departments,indicating that the conclusions of this paper have important practical significance. |
