| Because Chinese stock market have been established for a short time,and the retail investors is main components in our stock market,which makes the Chinese stock market quite different from the European and American markets.Due to cognitive limitations of retail investors,they often make decisions by their emotion,course the information in the market is highly asymmetric.Therefore,the market is often stirred by investor emotions,and there are many anomalies that cannot be explained by the efficient market theory.Barberies and Shleifer’s book "Style Investing"(2003)mentioned the concept of "sectors".They believed that investors would tend to classify stocks into different categories for "thematic investment".This phenomenon is quite common in Chinese stock market.the industry is the most common "theme" and "sector".Because of investors’ attention,it will naturally cause the market reacting.From the view of empiricism,the investors’ excessive attention to the industry may lead to an independent market quotation,and it can attract the attention of the entire market,which in turn would lead to excessive turnover of individual stocks in the industry.In Chinese stock market,we often see the stock prices of leading companies in the hottest industries reach s new high under the embrace of investors.When the industry over the hill,means the party is end,It could see the stock price fall sharply.The severe market fluctuations is not conducive to the stability of the Chinese stock market environment,and it has a terrible influence on the common interests of investors.Therefore,this paper studies the phenomenon of industry fluctuations from the perspective of behavioral finance,In behavioral finance,research on investor attention has been pursued by many scholars.Due to investors’ limited cognitive,and selective acceptance of news,and they don’t have the ability to have a consideration of all the information on the market,investors tend to focus on the information that is enough attractive.For example: In the stock market,investors tend to focus on the abnormal returns and abnormal trading volume of stocks and industry-sectors,which in turn influence investor behavior and market conditions.Bordalo,Gennaioli,and Shleifer(2012)proposed a "salience" theory to describe the above-mentioned investor psychology;Cosemans(2021)further proposed a "salience" factor based on the "salience" theory,and used it in stock pricing.This article takes Shenwan’s second-level industry classification standard as a sample to construct an industry-level “salience” factor to measure investors’ attention on the industry-sectors.Through empirical research,it is found that when A-share investors expect the future earnings of the industry,they will invest industries with salient returns in the past.In other words,investors will be attracted to industries witch has salient positive returns,resulting in overvaluation of these industries,and having lower returns in the future.On the contrary,industries with salient negative returns in the past are undervalued and will have higher returns in the future.This paper finds empirical support for these predictions on the cross-section of A-share industry return data.Though considering the book-to-market,beta,market value,and liquidity,the effect is still significant.In addition,there also be many correlations between different industries.On the one hand,the correlations comes from production.On the other hand,the correlations are influenced by the behavior of investors in the stock market.Zhang(2019)pointed out that the degree of risk exposure and risk contagion of stocks has a significant impact on stock returns.Industry as a collection of stocks,the industry’s return is also influenced by the degree of industry risk exposure.This paper uses the method of Zhang(2019)to construct the relative centrality at the industry level.Through empirical tests,it is found that the impact of the industry salient effect on the industry’s return is reduced by the increase of the relative centrality of the industry.From the perspective of the correlation between market volatility and industry volatility,the industry is more closer to the market center,it’s volatility is more susceptible to the public factors from market.The industry return fluctuation is easier to be synchronized with stock market fluctuation.Therefore,investors with salient thinking are less likely to perceive the existence of salient returns of the industry,so the impact of salient thinking on investor behavior becomes more weaker.From the perspective of investor category learning: the industry is more closer to the market center,The uncertainty of industry fluctuations and the uncertainty of market fluctuations will be more similar,and investors would consider more market level factors,so the industry salient factor is more difficult to effect the behavior of investors. |
