Research On The Relationship Between Investor Sentiment And The Return And Volatility Of The Shanghai Stock Index Series

Since the 1980 s,financial markets have emerged from the illusion of excessive stock price volatility and investor over-trading,which cannot be explained by traditional financial theory.The investor sentiment in behavioral finance has been widely concerned by scholars.The results of domestic and foreign research indicate that the stock market will be affected by investor sentiment.With the establishment of the Shanghai Stock Exchange in 1990 and the establishment of the Shenzhen Stock Exchange in 1991,the scale of China’s stock market began to expand rapidly.Although its development speed is fast,there are still many immature places,and it still needs to continue to reform the market.China’s stock market is booming and plunging.The proportion of small and medium-sized investors is over 90%.There are more speculative behaviors in investors.Irrational emotions have a greater impact on the stock market.The Shanghai Stock Exchange Series Index is a typical representative of many indexes in China’s stock market and an important reference for investors to make investment decisions.Therefore,studying the relationship between investor sentiment and China’s SSE series index will help to enrich the measure of investor sentiment in China and analyze the differences between different stock indices in the SSE series of indices.It also helps investors and regulators to understand the interaction between investor sentiment and the SSE series index,and promote the rational investment of investors and the effective supervision of regulators.Based on the existing research results at home and abroad,combined with the actual development of China’s stock market,and in order to improve the time and frequency of sample data,this paper uses the daily data from January 4,2013 to December 28,2018 to construct the selected emotional agent variables into a comprehensive investor sentiment indicator by using the principal component analysis method.On this basis,this paper applies short-term constraints to investor sentiment and SSE series index income indicators,and constructs structural vector autoregressive(SVAR)model to study the relationship between investor sentiment and SSE series index returns in different periods.The empirical results show that the investor sentiment interacts with the SSE series index.The investor sentiment has a significant positive impact on the returns of the SSE series index in the current period,and the impact gradually decreases with the passage of time,while the SSE series index returns have no effect on investor sentiment in the current period,and have a sustained impact in the later period,with a time lag.Finally,this paper constructs an EGARCH model with investor sentiment,and studies the relationship between investor sentiment and the fluctuation of the returns of the SSE series.The empirical results show that investor sentiment has a greater impact on the volatility of the SSE index returns,while the impact on the volatility of the SSE 50 index returns is smaller.Although the SSE 50 index covers the top ten heavyweights in China’s Shanghai stock market,investors are still less concerned about their stocks than other stock indices,and investors are more inclined to speculate in small cap stocks.Moreover,the impact of investor sentiment on stock market volatility has a leverage effect,and the impact of optimistic investor sentiment on stock index returns is higher than pessimistic investor sentiment.