Interaction Between Chinese Investors' Sentiment And Stocks Market Return

In modern finance, the assume "rational investor" has their own limitations, and there have been behind the pace of financial research in many areas. Therefore the attendant behavioral finance get preference of modern financial economist more and more. In micro-finance, the return volatility and price-related factors, has already begun abraod since 1970, and achieved remarkable success not only in the current relevance, and also the asymmetry and the lag. In addition, the use of Heteroscedasticity model depicting the returns volatility has also made certain achievements.With the rise of behavioral finance, people relize that when the economy is in a period of prosperity, due to change in investor sentiment (confidence in the market, and expected attitude changes), which always causes short-term ups and downs in the stock market. Thus the relationship between income and investor sentiment of stock market gets people's attention.The core of the artical is the basic characteristics and the interaction with returns of Chinese investor sentiment. As the stock market trading volume is considered to be the indicator signals of investor sentiment, refer to energy fluctuations theory and use the trading volume for the indicators of investor sentiment, abandon to obtain investor sentiment through the survey manner. On this basis, using ARMA model to research its own characteristics of investor sentiment, empirical results show that investor sentiment has "sheep herd"; Then use var model and Granger causality test to research the relationship between investor sentiment and the market returns, thereafter we find that two series have rejected the original assumptions, and Granger causal relationship exist between each other. Then the model of EGARCH Heteroscedasticity tests the impact of the returns on investor sentiment, and we find that expecting to reduce returns will bring greater impact to investor sentiment than expecting to rease the returns. The GARCH-M Heteroscedasticity model show that the impact of investor sentiment to returns exist a clear "risk premium" phenomenon.