Empirical Study On The Influence Of Investor Sentiment On China's Stock Market Returns

In recent years,with the rapid development of the capital market,investors often find that the market is full of financial phenomena that cannot be explained by traditional financial theories.The research on investor behavior has become a new breakthrough point for many scholars and economists.After observing the development bottleneck of traditional finance,they all started to participate in the research of behavioral finance,and investor sentiment is a very important concept in behavioral finance,it is attracting more and more attention from experts and scholars.In the process of studying investor sentiment,one phenomenon is often studied,which is the value premium of capital.The value premium refers to a stock's performance in the secondary securities market that exceeds his intrinsic value because of the irrational factors such as capital factor and emotional surface.Especially such as China,which have a higher proportion of retail investors rather than institutional investors,there are often some stocks that are not supported by fundamental performance,in the short run and even in the medium term,they can get more attractive gains.But whether the benefits of this premium are sustainable,and whether there is an inevitable link between different sectors and individual stocks,it has always been the focus of investors and researchers.In recent years,especially after the three times crash in stock market andfusing,the sharp fluctuations of China's stock market can be seen that the irrational degree of Chinese investors is very serious.From the perspective of individual investors,most investors in China's stock market have not studied systematic investment analysis,and the professional research capabilities such as valuation models and financial statements are not fully grasped.Most of the investors in A-share care more about the policies,stable push and hearsay instead of the fundamentals of the company.In their minds,if a company can tell attractive story to the public or it has some amazing concept,it's share price will rise sharply.It is precisely because such investors occupy an unnegligible proportion in the market of our country,the stock market often appears to shake regardless of the basic situation.So,in contrast to the western developed capital,the investors our stock market have a weaker capacity for information,and the poor judgment of the disturbance,which often makes the poor judgment of some kind of information overinterpreted in the decision-making process.Therefore,in a certain extent,investors in China's securities market are also more vulnerable to market information,which often occurs in response to overreaction or herd behavior.According to behavioral finance theory,the formation of the value premium may be caused by the excessive reaction bias of investors,such as follow others in decision-making.In the A-share market,retail investors are not so rational as institutional investors to measure the underlying value.So,the study of value premium related issues,not only helps to guide the stock investors in investment strategy practice,also helps to test the traditional finance theory and behavioral finance theory to explain market vision aspects of applicability.So the research on investor sentiment can not only help researchers to further understand the understanding of behavioral finance,but investors can also improve their understanding of investment and spend more energy on the basic research of the company rather than focusing on speculative information.At the same time,the investment ability of the whole market investors will be improved to a greater extent,so as to maintain the liquidity and stability of the overall market,so that investors can obtain long-term investment returns through high-quality companies,and high-qualitylisted companies can effectively raise funds through the stock market and invest them in the virtuous circle of r&d.The focus of this paper is to build the emotional index CEI,which is applicable to our national conditions,and select the zz1000 index which can reflect the real market trend.The research object is the tradable shares of all a-shares,the time series selection from January 2010 to October 2017.After the analysis of the whole a-shares,the paper also focuses on the analysis of the influence of the investor sentiment in different sectors based on the shenwan industry index,and uses the method of principal component analysis,OLS regression analysis and fama-french three-factor model.Firstly,the innovative investor sentiment index is constructed.Secondly,the existence of investor sentiment and analyses the correlation between the capital market were analyzed in depth.Finally,to different industries,different time,the effects of investor sentiment on the stock market,respectively,carried on the thorough analysis,to identify investor sentiment in different directions of sensitivity.Through the empirical analysis,we concluded that in the Chinese stock market,investor sentiment does exist as the disturbance,and is one of the important factors that affects the value of securities.And in different times or different industry,the impact of investor sentiment on investment income is different but it is positively correlated,that is,the increase of investor sentiment will increase the volatility of investors' earnings,and vice versa.Therefore,in order to avoid the excessive and unnecessary fluctuation of investor sentiment in China's securities market,the regulatory authorities should step up supervision and strengthen investors education,guiding the concept of value investment and making due contribution to the smooth and healthy development of China's securities market.