The Relationship Between Investor Sentiment and Stock Market Price

Abstract

With the birth of behavioral finance, more and more researchers have brought the individual psychology of investors and the behaviors that it fosters into the theoretical research scope of finance. From the perspective of micro individual behavior, they try to explain the causes of complex phenomena in the financial market with psychological factors such as behavioral motivation. This paper mainly analyzes the impact of investor sentiment on the price volatility of China's stock market. On the basis of combing the existing theoretical literature, based on the daily Chinese investor sentiment index published by the National Development Research Institute of Peking University and the return of the CSI 300 Index, the research hypothesis is put forward. First, the GARCH model is constructed to calculate the daily volatility of the return of the CSI 300 Index and the Granger causality is used to test the relationship between investor sentiment, stock price return and volatility. Secondly, the paper empirically analyzes the relationship between investor sentiment and stock price volatility by constructing VAR model, and finds that investor sentiment will indeed have the same impact on the price volatility of China's stock market, and the stock price volatility will react on investor sentiment and form an interactive impact, which will gradually weaken over time. Finally, from investors The government and other aspects put forward suggestions to further improve the operation of China's stock market.