Author(s)

Yan Gu, Shengyu Xu

Corresponding Author

Yan Gu

ABSTRACT

Investor sentiment is an important factor affecting the performance of the stock market. There are two main types of indicators to measure investor sentiment: direct indicators and indirect indicators. There are three main theories that investor sentiment affects the stock market, including noise trading model, short selling restriction, and investor sentiment contagion. This paper uses the principal component analysis method to conduct principal component analysis on the number of new accounts, consumer confidence index, monthly Shanghai-Shenzhen rise and fall index, turnover rate and price-earnings ratio, and obtains a comprehensive proxy indicator of investor sentiment. Then, the empirical analysis is carried out using the investor sentiment index and the CSI 300 index. The empirical results show that there is a positive correlation between investor sentiment and market index. Investor sentiment has a negative impact on itself, and the CSI 300 price shock has a positive impact on investor sentiment. Investor sentiment is affected by its own factors in the same way as the CSI 300 Index, and the CSI 300 Index is more affected by its own factors.

KEYWORDS

Investor Sentiment, Stock Market, CSI 300 Index