Empirical Study On Relationship Between Investor Sentiment And Market Return In Different Markets

Chinese security market is not a mature and effective market.The stock market investors are mostly individual investors and they cannot form reasonable value of investment.There are a lot of irrational behaviors in the stock market,so the traditional financial theory is not suitable for the status of Chinese security market.The study of investor sentiment can arouse the investor's attention to the potential impact factors of the investment strategy.It has a very important theoretical and practical significance in improving supervision efficiency of the regulatory authorities,strengthen the risk management and control of the Chinese stock market,and thus ensuring the stable and healthy development of the Chinese stock market.This study selects investors' sentiment as the study object,and tries to explain the direct interaction between investor sentiment and market return in different market conditions.Specific ideas:First,the concept of investor sentiment is clearly defined,and from the perspective of investor's emotional definition and connotation,we select more direct market indicators that reflect investor sentiment.We use the Principal Component Analysis to construct investor sentiment index.Secondly,we draw on nonparametric diagnostic methods to divide the market during the sample period(2003.1-2007.3)according to the Shanghai Composite Index.Thirdly,we use the Granger causality test to determine whether the two stages have Granger causality relationship,and we make a further study on the degree and significance of the interaction between investor sentiment and market return.The results are as follows:In the whole sample stage,the rising stage 1,the current and historical market yields have a positive impact on the investor's sentiment change,and the impact of the current returns is greater than the impact of historical returns.In the decline stage,the rising stage 2 and 4,there is no Granger causality between investor sentiment and market returns.The influence between each other is not statistically significant.The impact of investor sentiment on current market return is only significant in the full sample stage.The different conclusion between the whole sample stage and each stage indicates that there is a difference mechanism between the investor sentiment and the market return.