China’s Stock Market Liquidity,Market Sentiment And Investment Returns

As an important part of the world’s second largest economy,China’s stock market is gradually promoting the reform and opening of its capital markets to improve market transparency,attract foreign investors and enhance investor protection.China’s stock market can be described as an emerging and developing market.With huge potential and growth opportunities,there are also many challenges and risks.Since China’s stock market started late and is not mature enough,there are problems such as large market volatility,insufficient market supervision and ineffective investor protection.At the same time,government policies,economic development and other factors may have an impact on the market.China began to implement the stock issuance and listing system in 1990.In terms of trading mechanism reform,the merger and reorganization of Shenzhen Stock Exchange and Shanghai Stock Exchange was implemented in 2007,and a perfect trading mechanism was launched to provide support for the liquidity of stock trading.In 2009,Shenzhen Stock Exchange established the Growth Enterprise Market.In 2010,it officially launched margin trading and short selling business and stock index futures business to help professional investors to conduct two-way trading and effectively manage investment risks.In 2019,the Securities Law was revised to further improve the listing system and strengthen information disclosure and investor protection.In June of the same year,the science and Technology Innovation Board was established and the registration system was piloted to accumulate practical experience for the implementation of the comprehensive registration system.In 2020,the central government proposed to promote the market-oriented allocation of capital factors,and the capital market should support the transformation and upgrading of the real economy.In the critical period of the transformation of old growth drivers of the Chinese economy,the ability of the capital market to serve the real economy is of vital importance.It can be seen that all aspects of the stock market,economic entities and investors are designed to promote the healthy development of the stock market,maintain market liquidity in a reasonable and sufficient range,avoid the spread of panic,and protect the rights and interests of investors to the greatest extent.With the continuous growth and development of China’s securities market,the number of investors in the stock market is also increasing.Institutional investors and retail investors are the two most important participants.The factors affecting the investment returns of the stock market are also getting more and more attention by investors,so the relationship between the stock market liquidity,the market sentiment and the investment yield is worth in-depth study.Since the basic trading elements of the stock market involve capital,investors,stock targets,etc.,the change of capital supply is an important factor affecting liquidity.After adding other subjective and objective factors,the investment judgment and trading decision of investors are affected,and the investment yield is finally affected.Based on the traditional objective index data of A-share market,the market sentiment index adds the investor sentiment index and the related factor of capital supply to construct the comprehensive index of investor sentiment.Starting from the interaction between stock market liquidity and investor sentiment,the influence mechanism of both and investment yield is analyzed.Select all stocks in China’s A-share market,refer to the inliquidity index proposed by Amihud,and use it to measure the liquidity level of stocks,that is,the weaker the inliquidity,the stronger the liquidity,on the contrary,the stronger the non-liquidity,the weaker the liquidity.The principal component analysis method is used to construct the emotional composite index,and finally the comprehensive model of investment return rate is constructed to analyze the influence relationship and mechanism between stock market liquidity,investor sentiment and investment return rate.This thesis discusses the empirical research on the relationship between stock market liquidity,market sentiment and investment return,and finds that the relationship between stock market liquidity and investment return is significantly positively correlated from a long-term perspective.Comparing the investment return rate and comparing the interaction terms of liquidity and market sentiment,it shows a significant positive correlation with investment income,indicating that market sentiment will significantly enhance the regulating effect of the relationship between market liquidity and investment income.Through a deeper understanding of the interaction between these factors,in the relationship between the actual investment context,its significance is that it can help investors better understand the market operation mechanism,market characteristics and investment opportunities,improve the accuracy and efficiency of investment decisions,but also to the market regulation and financial intermediary services put forward new requirements and challenges.