The Impact Of Investor Sentiment On Stock Returns

Since its establishment,China’s A-share market has been showing serious emotional characteristics.This emotional feature is more obvious in gem.In order to study the impact of this emotional feature on China’s securities market,this paper study the behavior decision of investors to reveal the impact of investor sentiment on the stock market,so as to build an early warning mechanism to promote the healthy development of the market.In theory,this paper explains the definition of investor sentiment and the reasons for its formation,and reveals the internal relationship between investor sentiment and stock returns.In the empirical aspect,this paper takes the growth enterprise market from March 2011 to March 2019 as the research object and refers to the construction methods of BW index and CICSI index,and puts forward.two subjective indexes(consumer confidence index and investor confidence index of the previous period),seven objective indexes(closed-end fund discount rate,number of IPOs,first day return rate of IPO of the previous period,market turnover rate and number of new investors’ accounts)It is found that the trend of ISI2 composite index of investor sentiment is highly coincident with that of Shanghai stock index and growth enterprise market index,and the correlation is significant.Furthermore,we use VAR model to explain the impact of investor sentiment on stock returns.The empirical results show that investor sentiment has a significant impact on the growth enterprise market returns;the impact of investor sentiment on the growth enterprise market returns is long-term and complex.In the long run,the influence is negative;investor sentiment is unstable,Influenced by stock returns and the influence of stock returns on investor sentiment has a lag period,which shows that investors will not react to the change of stock returns immediately.Based on the empirical conclusion,this paper considers that investor sentiment index is of great significance to investors and regulators.For investors,they need to control their own emotions.For regulators,they should take investor sentiment as the key market monitoring indicator.