Research On The Impact Of Investor Sentiment On Stock Market Volatility Under The Background Of Economic Policy Uncertainty

With the emergence of more and more market anomalies,it is found that the traditional financial theory can not make a reasonable explanation.Based on the above background,behavioral finance came into being.Starting from the characteristics of human beings,behavioral finance believes that investors are irrational,and this irrational emotion is often reflected in the financial market.As far as China is concerned,the infrastructure construction of the financial market needs to be improved,the investor group of the financial market is still relatively young,and its role in social stability is still being gradually cultivated.In such an environment,irrational investor sentiment in the market is likely to have a significant impact on market price fluctuations based on its rendering and dissemination characteristics.Especially in recent years,the uncertain factors affecting international and domestic environmental changes have increased.Therefore,the uncertainty of China’s economic policy is manifested in the frequent release of new policies or the repeated adjustment of existing policies,which stimulates the generation and accumulation of investor sentiment to a certain extent.In the context of uncertain economic policies,investors’ sentiment is relatively low,expectations are relatively pessimistic,investors’ willingness to trade is not strong,and the effectiveness of economic policies is weakened.Based on the heterogeneity of Chinese investors,this paper establishes a volatility prediction model considering the uncertain indicators of economic policy,improves the accuracy of the prediction results of the realized volatility model,and intuitively shows the impact of investor sentiment on the volatility of the stock market under this background,which has certain theoretical significance and practical value.It is found that:(1)without considering other factors,the current volatility is mainly affected by the realized volatility of the past day and week,among which the daily realized volatility has the greatest impact,while the realized volatility of the past month has no significant impact on it.(2)After introducing investor sentiment,the coefficient before changing the index is significant,which shows that investor sentiment will have a huge impact on the current volatility;At the same time,the impact of daily realized volatility is still the largest,indicating that the frequent trading behavior of short-term investors is still an important factor causing significant changes in current volatility.(3)After the economic policy uncertainty is divided into high and low intervals and included as a dummy variable,the coefficients before all explanatory variables are significant,even for long-term investors,they will be affected by this uncertainty.It is worth noting that in the state of high uncertainty of economic policy,the marginal contribution of each component has decreased,which indicates that the high uncertainty of economic policy is likely to make investors depressed,resulting in cautious and dare not trade,and the overall volatility in the stock market has decreased,which is also in line with the research conclusions of most previous scholars.