Investor Sentiment And Stock Returns

Since its birth,China’s stock market has made great achievements as well as experienced numerous challenges.From the perspective of the market’s performance,sometimes it is positive,and sometimes it is negative.Research on the stock market finds that there are often some abnormal phenomena that cannot be explained by traditional financial theories in the operation of the stock market.While the emerging behavioral finance brings new ideas for explaining these phenomena: behavioral finance believes that people are bounded rationality,and analyzing investor sentiment provides a new perspective for explaining market anomalies.Looking at the basic situation of investors in China’s stock market,the characteristics of different types of investors are different,but there is a lack of documentation that distinguishes them in the existing research.Under normal circumstances,individual investors have a low investment threshold,small capital needs,and simple review procedures.Besides this they account for the majority of investors;while institutional investors have high professional requirements and complex review procedures,so they account for a small proportion.Based on this realistic background,investors can be divided into two types of research objects:individual investors and institutional investors.By observing the investment characteristics and investment behaviors of the two types of investors,supported by theoretical analysis and empirical testing,finds out that the inter-relationship between subject and the risk and return of the stock market has a crucial and realistic meaning for explaining the abnormal phenomena.In addition to studying the impact of individual and institutional sentiment on the risk-return ratio of stocks,this paper also focuses on the interaction between individual and institutional investor sentiment.Due to the late development of my country’s securities market,stock trading,the system is not perfect,and is not perfect and relatively immature.In the selection of indicators,this paper refers to the existing literature,and believes that in immature markets,when investors are optimistic about the stock market,they will choose to open accounts one after another.So this paper regards “Institutional New Account Openings”as initial surrogate indicators for the “Investor Sentiment” variable.In order to measure the impact of irrational emotions on the risk-return ratio of stocks as much as possible,this paper selects five indicators that can reflect market conditions and eliminates the rational emotional impact of investors brought by macroeconomic factors.In the theoretical stage,through the combing of behavioral finance theory and the derivation of the noise trading model,the relationship between the two is briefly explained,and the hypothesis of this paper is put forward.In the empirical stage,multinomial distributed lag models(PDLs),and vector autoregression models(VAR)were used to verify the previous views and assumptions and conduct robustness tests.Finally,the conclusion of this paper is drawn: there is an asymmetric mutual influence relationship between individual and institutional investor sentiment;both individual and institutional investor sentiment have an impact on the stock market risk-return ratio,and there is a relationship between individual and institutional investors and the stock market risk-return ratio.And there is a Granger bidirectional causality among individual,institutional investors and the stock market risk-return ratio.