An Empirical Study Of The Impact Of Investor Sentiment Factors On Stock Returns Of Different Companies

Traditional finance has always been based on the efficient market hypothesis.The efficient market hypothesis holds that rational investor will carry out arbitrage to quickly restore asset prices to their intrinsic value through rational analysis,when the price of assets in the financial market deviates from its intrinsic value.However,the actual situation of most financial markets has the phenomenon of asset mispricing.Asset mispricing means that asset prices in financial markets deviate from their intrinsic values for a long time.In order to explain the unexplainable phenomena in traditional finance,behavioral finance has emerged.Investor sentiment is the focus of research in behavioral finance.This article reviews the development of investor sentiment,the measurement of investment sentiment factors,and the study of the relationship between investor sentiment and stocks.It was found that the method of Baker and Wurgle,the principal component analysis,constructing investor sentiment factors was the most commonly used measurement in the study of investor sentiment.At the same time,it was found that the focus of previous researches was on investor sentiment in the market,but few studies on investor sentiment of individual stocks.This article forms relative strength index,psychological line index,adjusted turnover rate and logarithm of trading volume into investor sentiment factors of individual stocks by the principal component analysis of Baker and Wurgler,and use Fama-French five-factor model and Fama-Macbeth cross-section regression model to analyze whether this investor sentiment factor has the ability to explain stock returns.Permutation grouping and Fama-French five-factor model analy whether the effect of the investor sentiment factor on the stock returns of different firm characteristics will be different.The empirical results show that the investor sentiment of individual stocks based on the principal component analysis in this article cannot be fully explained by the five factors,and there have a significant negative correlation to stock returns,proving that this factor is effective.And through the Fama-French five-factor model,it is found that the investor sentiment factor has a greater impact on the stock returns of large-scale and high-debt companies.