The Influence Of The Investors' Sentiment On The Stock Market Returns And Volatility

Till now,with the development of China's stock market,several significant achievements are made in the quantity of listed companies,scale of shares market value,rich investment products,high efficiency and so on.Meanwhile,the problems still exist,such as the domination of individual investors,large scale volatility,and investors' excessive pursuit of short-term gains.Under the background of increasing the opening up of the financial sector in China,financial deleveraging which needs smooth the direct and indirect financing channels,and the upcoming STIB(science and technology innovation board),it is of great practical significance to study the impact of investor sentiment on the returns and volatility of China's GEM index.After the research questions are put forward,based on the research and literature,firstly,the principal component analysis method is used to construct a composite index to measure investor sentiment,and then SPSS software is used to study and analyze the relationship between the constructed composite index and the returns and volatility of the GEM index.The following empirical conclusions are drawn after study:First,current investor sentiment has a significant positive correlation with the excess return on the GEM index.Second,investor sentiment is greatly affected by short-term high returns.When the market weakens,investor sentiment will be suppressed.Third,the excess returns of the GEM index are affected by the investor sentiment in the previous period in the long-term,and the investor sentiment is affected by the excess returns rate of the previous GEM index in the short-term.Fourth,there is a significant positive influence between the investor sentiment and the GEM index,and the investor sentiment in the bear market cycle has a greater impact on the trend of the GEM index.Fifth,the investor sentiment in the current period always has a significant positive correlation effect on the volatility of the GEM index while a negative feedback effect on the volatility of the next period.From the above conclusions,the short-term investor sentiment has a more obvious impact on the yield and volatility of GEM.In particular,investor sentiment may be overly optimistic when the GEM is rising,may be excessively pessimistic while the GEM is in the process of decline.Especially in the bear market cycle,where short-term investor sentiment changes have a more pronounced impact on GEM index.The main reasons for this phenomenon are the retail structure dominated by retail investors in China,the imperfect market information disclosure mechanism,the poor of risk management and supervision.Therefore,from the perspective of government management,under the background of the science and technology board is coming,we should strive to improve the investor structure of China's stock market,improve the market information disclosure mechanism,improve the risk management and supervision,and insist on opening up to the outside world,encourage the study of mature foreign investment concepts,and gradually guide market investors to more rationally deal with the stock market volatility,smooth the irrational fluctuations of the stock market,and guide the stock market to play its financing and investment functions effectively.