An Empirical Study On The Relationship Between Investor 's Emotion And Stock Index

Because of its partial succeess in explaining some of those anomalies,behavioral finance has got substantial attention from academics and practitioners.The investor sentiment,one proxy of the investor psychology,also becomes an important factor in the study of the investor behavior and psychology.Chinese stock market has developed for20years, but during that time, the stock market slump, investors like a roller coaster, the mood also follow change radically, and sometimes happy, sometimes sad. Stock market’s volatility seems to be difficult to use economic, monetary and other factors to explain, and investor psychology is very important, is also in this paper to study the topic-investor sentiment.The meaning of investor sentiment research reads as follow:1,it can give hint to understanding investors’behavior.2,it is useful to learn the interaction of market returns,variability and trade volume;3,to which extant it is an opportunity to earn extra returns can be declosed;4,it is helpful for the government to take policy and control the market.As an abstract concept,investor sentiment needs accurate measurement,which is the primary problem we have to solve.Foreign and domestic researchers have given us a sum of incestor sentiment indicators that have been proved to be sentiment proxies.This thesis is going to judge the forecasting ablility of several sentiment indexes by using the econometrics method of regression.Besides,factor analysis is uesd to construct a compositive index of investor sentiment (CIIS)by synthesizing theselected sentiment indexes mentioned before so that the stock return can be better forecast using CIIS.Through empirical research, this paper found that, market turnover ratio can forecast future stock return effectively while closed-end fund discount rate,first day return of IPO, volume and China’s macroeconomic leading index.The compositive index of investor sentiment (CIIS) has better forecasting ablility on stock return which has been spported by our empirical results.