Research On The Relationship Between Institutional Investor Sentiment And Stock Price Crash Risk

Institutional investors have been playing a huge role in the stock market with their advantages of huge capital and team since China’s stock market established.Due to the immature development of China’s stock market,institutional investors are easily affected by the overall market environment and have many irrational emotions and behaviors.In the development process of China’s stock market for more than 30 years,there have been many stock price crashes,in which the role played by the sentiment and behavior of institutional investors is worth discussed.Therefore,this paper takes A shares market as the research object and selects the data from 2007 to 2021 as the research sample to study the role of institutional investor sentiment in stock price crash.Based on the measurement of investor sentiment by previous scholars and the reality of China’s stock market,this paper constructs sentiment index by selecting five index variables which can reflect institutional investor sentiment.Then a vector autoregressive model between institutional investor sentiment and stock price crash risk is established to dynamically analyze their relationship.It is found the rise of institutional investor sentiment will increase the stock price crash risk and the increase of stock price crash risk will rise the sentiment of institutional investor.On this basis,this paper uses the stock price crash risk of China Securities 100 index and China Securities 1000 index to represent the stock price crash risk of large scale and small scale,and discusses the influence of institutional investor sentiment on the two types of crash risk.It is found that the impact of institutional investor sentiment on the crash risk of small-cap stock is greater than that of large-cap stock.The above research shows that institutional investor sentiment plays a negative role in stock price slump.Chinese stock market regulatory authorities should strengthen the supervision of institutional investors’ behavior and stabilize institutional investors’sentiment.