An Empirical Study On The Relationship Between Investor Sentiment And Stock Market Return

In the 1980 s,Behavioral Finance began to rise,simultaneously,the emotion in psychology was introduced into the research of financial market,which in turn accelerated the development of behavioral finance,and was used to explain the anomalies that can not be explained by traditional finance in the market,such as Herd effect,Closed-end fund discount mystery,Option smile,Disposal effect,Scale effect and Festival effect,etc.The existence of anomalies accelerate the deviation between asset price and intrinsic value,catalyzing the role of emotion in decision-making,and proving the linear relationship between emotion and investment decision-making,which in turn has an far-reaching influence on investment returns.The China's stock market has the characteristics of emotionalization,and the behavior of investors mostly presents the characteristics of irrationalization.As the development time of the market is relatively short,with all aspects is not perfect developed,Thus the study on emotion in China's stock market is not only conducive to the exploration of its mechanism,but also helps investors to invest rationally,effectively avoid risks,and further improve the stock market system.In this paper,I select the data from April 2008 to April 2018,taking the advantage of investor confidence index,number of new investors' accounts,turnover rate and opening sentiment as proxy variables,which be Synthesize into a principal component in the foundation of the theory of Baker and Wurgler(2006),and the research was fail finally.Then the eight classification indexes of investor confidence index are transformed into two emotion synthesis principal component factors SENT1 and SENT2 respectively.And after that all the variables makes a descriptive analysis firstly based on the converted sentiment indexes SENT1?SENT2 and number of new investor's accounts,turnover rate and opening sentiment.In this paper,I choose VAR model and SVAR model,combining with ADF? Granger causality test and impulse response analysis,to systematically analyze the relationship between investor sentiment and the return rate in China's securities market.Granger causality test shows that there exist a two-way causality between the number of new investors' account opening,turnover rate and stock return rate,which shows that the number of new investors' account opening,turnover rate and stock return rate can be predicted mutually;there has a one-way causality between the comprehensive emotional indicators SENT1 and SENT2 and the stock,and the return has a prediction for the comprehensive emotional indicators SENT1 and SENT2 ability to measure;opening mood can predict the comprehensive mood indexes SENT1 and SENT2 It is found that the proxy variable investor confidence index,number of new investors opening accounts,turnover rate,opening sentiment have an impact on the stock return,among which the investor confidence index has a positive impact on the stock return,and the positive impact are also exist in the number of new investors' account opening and turnover rate,spontaneously,the positive effect is also occur the degree of deviation between investor sentiment and market sentiment measured by opening sentiment.The research on the relationship between sentiment and stock return can not only help to study the mechanism of sentiment acting on the market,but also help investors to make rational investment,reasonably avoid risks,and help to establish an effective and perfect market mechanism.