The Impact Of Investor Sentiment On Stock Price Fluctuations

According to the survey report of Shenzhen Stock Exchange on individual investors in Shanghai and Shenzhen in 2020,as China has entered the era of wealth management,investors’ demand for investment and financing through stocks,public offering funds and other means has increased significantly,and new investors entering the market also show a trend of younger age.Trading in the securities market,the long-term investors value investment idea of rising year by year,and a high percentage of assets investors higher acceptance to the value investment idea,but compared with mature investment ideas,rational investment behavior of profits for investors,irrational investment still has high specific gravity,and excessive fear overconfidence accounted for 17.5%,accounted for 25.6%,Even profitable investors have irrational investment behaviors such as disposal effect,cronies’ rumors,and not using stop-loss strategies.In a structured market,short-term,extreme and radical issues are highlighted.In a market full of "noise" interference,what impact will emotional irrational behavior of investors have on stock price fluctuations?In this paper,the ISI index is used to measure the overall sentiment of the market,and the "individual stock return method" is used to measure the sentiment of individual stocks,so as to explore the interaction between investor sentiment and stock price fluctuations from both macro and micro aspects.In the literature review part,through sorting out the previous literature,it mainly analyzes the influencing factors and measurement methods of investor sentiment,as well as the relevant research of domestic and foreign scholars on investor sentiment and stock market.The theoretical analysis part mainly analyzes the changes of investor sentiment and behavior and the stock price fluctuation under the influence of market noise,and puts forward the basic hypothesis of this paper.The empirical analysis part deeply analyzes the synergistic changes between style investment and stock price volatility under different style preferences,and further briefly analyzes the impact of stock price volatility on investor sentiment in different industries and under the restriction of rise and fall.Finally,the following conclusions are drawn:First;Investor sentiment has a significant positive impact on stock price volatility.With the increase of sentiment index,stock price volatility will increase.Whether the overall market sentiment or individual stock sentiment is adopted,the results of the final test show the promoting effect of sentiment on stock price volatility,and the overall market volatility is the result of the joint action of many individual stocks.Second;Whether optimistic or pessimistic,investor behavior influenced by market noise will increase the volatility of stock prices.Through the rational division of investor sentiment by market index and individual stock returns,the regression results show that the overall market volatility caused by pessimism is greater than optimism,but the effect on individual stock performance is just the opposite.Third;The regression results under different style preferences show that stocks with the same style preferences in the market often have synergistic changes in stock price fluctuations.Under the influence of investor sentiment,large-cap stocks have the same high volatility as small-cap stocks.Stocks with low book-to-market ratio have higher volatility than those with high book-to-market ratio;The "loser" portfolios with the lowest returns were more sensitive to changes in sentiment than the "winner" portfolios with the highest returns.Based on the research conclusions,this paper puts forward three policy suggestions or inspirations :(1)simple rules,strictly abide by,through simple and effective methods to combat market noise,to avoid the market panic contagion;(2)Strengthening expectation guidance,system construction and supervision;(3)Strengthen the education of investors and establish correct investment concepts.