An Empirical Study Of The Impact Of Investor’s Sentiment On Stocks Return

Efficient market theory is the traditional theory of finance.Behavioral finance is an emerging discipline,although it has not yet formed a theoretical analysis system,but also has become more and more perfect.Investor’s sentiment is one of the main theoretical foundations of behavioral finance to explain market anomalies.When investors make trades,their subjective emotions will affect their decision-making and judgment,and then affect the performance of the stock market.Therefore,there are many shortcomings in the research of traditional finance theory.The developments in behavioral finance allow investors to better understanding in stock price changes.Considering the actual situation of China’s financial market,this article draw lessons from Wurgler and Baker to construct a comprehensive index of investor sentiment.Under the research framework of behavioral finance,by comparing the positive and negative investor’s sentiments,we found that the average return of stocks in various industries has changed:(1)The return rate of stocks in A-share will be high when the investor’s sentiment is high.Furthermore,for securities in various industrials,this return rate under a high investor sentiment is higher than that under a low investor sentiment.(2)The average return of stocks is an asymmetry in the state of high and low sentiment.If investors are groundswell,the return rate will be high,vice versa.The yield of each industry is higher,but when the level of sentiment is low,the average return of each industry’s stock does not show a significant drop.This paper analyzes the updated investor’s sentiment and the average return of stocks in each period through VAR model,and comes to the conclusion that the change of investor’s sentiment comes from the change of the average return of stocks,and the change of investor’s sentiment can also affect the average return.