The Impact Of Investor Emotion On Stock Return

This paper reviews and summarizes the literature on the definition and construction of investor sentiment and its relationship with stock returns.On this basis,by selecting the Turnover Rate(TURN),P/E Ratio(PE),New Number of Accounts(NOA),Closed-end Fund Discount Rate(CEDF),Monthly Market Advance-Decline(MAADL)and Hang Seng AH Share Premium Index(PI)and their lags in the securities market,using principal component analysis to calculate investor sentiment indicator(SENT).Then,using the rate of Shanghai stock exchange index return and the investor sentiment as the research objects.By establishing VAR model,the causal relationship between investor sentiment and stock return rate is tested and the dynamic process between the both of variables is studied.Then,by establishing a single factor model of investor sentiment and a modified Fama-French three-factor model to regress the yield of Shanghai Stock Exchange,it is concluded that investor sentiment does significantly positively affect the yield of the stock market;The impact of investor sentiment on stock returns in different styles and industries are studied by empirical research.The results show that the stock return rate is significantly affected by investor sentiment.There is a significant positive relationship between the current stock return and the current investor sentiment,and the stock return rate can be directly predicted in the next period.The contribution rate of investor sentiment to stock returns is significantly less than the contribution rate of stock returns to investor sentiment.Investor sentiment has a particularly strong impact on high P/E,low-priced and small-cap stocks.The study found that stock returns in different industries are significantly affected by investor sentiment.construction industry,real estate industry,culture and entertainment industry,transportation&warehousing&postal industry and finance are sensitive to investor sentiment.Manufacturing,scientific research industry and technology services industry and water conservancy & public facilities management industry are not sensitive to investor sentiment.