Analysis Of The Influence Of Investor Sentiment On Stock Excess Return

Since the establishment of Shanghai and Shenzhen Stock Exchanges in 1990,the Chinese stock market has developed rapidly,expanded continuously in scale and made great achievements.But compared with western markets with hundreds of years of development history,Chinese stock market started late,and most of the investors in the market are individual investors,investment knowledge and skills are not enough,so that they can be easily controlled by emotions.At the same time,compared with institutional investors,individual investors have limited channels to receive information at a lower speed,which leads to some investors blindly follow the trend and follow the grapevine to make irrational transactions.In addition,in the face of market fluctuations,investors’ emotions converge,which is easy to produce the herd effect,which makes the stock market volatility more intense.Chinese stock market booms and tumbles,many anomalies can not be well explained by the traditional finance theory,but the investor sentiment theory can make up for its shortcomings.Therefore,it is necessary to introduce investor sentiment to provide a new perspective for studying the volatility of stock returns and financial anomalies.The main research contents of this paper are as follows:This paper first draws on the construction of comprehensive indicators of investor sentiment by domestic and foreign scholars.In terms of objective indicators,it selects closed-end fund discount rate,market turnover rate,number of new shares issued,first-day earnings,and number of new investor accounts.In terms of subjective indicators,it selects consumer confidence index and constructs investor sentiment index based on principal component analysis method.And further through the trend of investor sentiment index and Shanghai Composite Index and the correlation between them to verify the effectiveness of the construction of the index.Then the investor sentiment index is introduced into the five-factor asset pricing model to build a five-factor asset pricing model including investor sentiment.Then,aiming at the whole A-share stock market and different industries,the quantile regression model is built to measure the difference of the impact of investor sentiment on stock excess return under different levels of stock excess return.The empirical results show that: First,in terms of the positive and negative impact of investor sentiment on stock excess return,investor sentiment has a negative impact on low and medium excess return,and a positive impact on high excess return.Second,in terms of the impact of investor sentiment on stock excess returns,investor sentiment has a relatively large impact on low and high excess returns.Third,for different industries,under the low excess return rate,the impact of investor sentiment on the excess return rate of different industries is not significant,while under the high excess return rate,investor sentiment has a great impact on the excess return of stocks of finance,comprehensive and industrial industries.Finally,impulse response is used to analyze the linkage relationship between investor sentiment and stock excess return under different regional systems.The results show that the Chinese stock market can be divided into three regional systems by using the Markov zone conversion model: rapid decline period,low lingering period and rapid rise period.Under the threezone system,the impact response paths between investor sentiment and stock excess return are basically similar,but the impact response degrees are different: investor sentiment has a significant positive effect on the positive impact of stock excess return,and stock excess return has a negative effect on the positive impact of investor sentiment.The response degree of investor sentiment to the shock of stock excess return is the smallest under the low lingering zone system,and there is no difference between the rapid decline period and the rapid rise period,and the response degree is high.The response degree of stock excess return to investor sentiment impact is greatest in the period of rapid rise,followed by the period of low hover,and minimum in the period of rapid fall.In conclusion,the investor sentiment index constructed in this paper conforms to the reality of the stock market fluctuations,and can be used to analyze the differences of the influence of investor sentiment on the excess return of stock investor sentiment in different industries.At the same time,for the linkage analysis between investor sentiment and stock excess returns,it will help the supervision departments to formulate supervision measures in the different stages of the stock market operation,which will promote the healthy development of the stock market in our country.