Internet Financial Investor Sentiment And Its Interaction With The Return Of Internet Financial Products

Internet financial products generally refer to all financial products managed through the Internet.This kind of innovative financial management mode represented by P2 P network loan has been widely concerned and recognized.The market for Internet financial products is booming,but it also brings huge risks.Among them,the market and return of Internet financial are greatly affected by behavioral factors such as Internet financial investor sentiment due to the participation of a large number of individual investors.The interaction between Internet financial investor sentiment and the return of Internet financial products is an urgent problem for both financial regulators and academic researchers.However,the existing research on investor sentiment mainly focuses on traditional stock markets such as stocks,while there is a lack of research on investor sentiment in new financial sectors(Baker & Wurgler,2006;Huang et al.,2015;Benhabib et al.,2016;Aboody et al.,2018).At present,many related researches on investor sentiment are mainly concentrated in the stock market.Mainly due to its relatively mature development,perfect index system and easy data,it is more difficult to construct investors in the Internet financial products market.According the existing literature based on the stock market,this paper describes the investor sentiment based on Internet financial characteristics,and conducts empirical research on the monthly data mainly collected from Wind and Net Loan database(www.wdzj.com)during January 2014 and December 2017.In the process of index construction,this paper applies the ten indicators of the Internet financial market to construct the Internet financial investor sentiment,including four stock-comparable indicators(the numbers of newly added platforms,the numbers of newly added problematic platforms,volume,and turnover-rate)and six innovative indicators that reflact Internet financial characteristics(net inflow of funds,the numbers of investors,the proportion in Internet financing products,total individual investment,Internet Finance Index,and Net Loan Popularity Index),which is by far the most complete investor sentiment indicator system for China's Internet financial products.Taking into account the impact of macroeconomic cycle changes on the Internet financial investor sentiment,we have removed relevant macroeconomic variables to better measure the irrational behavior of investors.Then,through principal component analysis,this paper has synthesized the numerous indicators introduced above and generate a time series of Internet financial investor sentiment index.Considering the risk spillover effect of the Internet financial industry on the traditional financial industry,investor sentiment between the Internet financial market and the traditional financial market(stock market)may affect each other.This paper uses the VAR model to analyze the dynamic relationship between the Internet financial investor sentiment index and the Chinese wave index(iVIX)(Xu and Zhou,2018)that may interact in the current and future periods,and in order to further verify the effectiveness of Internet financial investor sentiment index.Finally,this paper improves the regression equations of investor sentiment factors in the existing literature.Considering the aggregation of the income series,the GARCH(1,1)-M model is applied to obtain the unbiased estimation of relevant parameters(Bohl et al.,2009;Liston,2016;Sharma & Vipul,2016).All results have been checked by using robustness tests.Through empirical research,the following conclusions are drawn: the relationship between Internet financial investor sentiment and financial product return is negative,and the systematic risk caused by investor sentiment will affect the expected return through the price fluctuation of financial products and get the risk compensation,which is consistent with the research results based on stock market investor sentiment.In addition,the interactive research results based on Granger causality test indicate that there is a one-way causal relationship from the Internet financial investor sentiment to the return of financial products.Moreover,it also found the impact and influence of Internet financial investor sentiment and China's wave index(iVIX),confirming a certain degree of extrude effect between the Internet wealth management product market and the stock market.Another interesting finding is that,contrary to the conclusions of domestic and foreign stock market investor sentiment research,the number of new platforms derived from the number of IPOs is negatively correlated with Internet financial investor sentiment,which can be explained by the phased regulatory policy of the Internet financial products market.