Investor Sentiment on the Effects of Stock Price Fluctuations

Abstract

In this paper, based on the behavioral finance theory and the BW method, the proxy index that can accurately reflect the investor’s sentiment is chosen, using principal component analysis to construct the investor’s sentiment comprehensive index. Then the authors establish VAR model to study the impact of investor sentiment on the stock price volatility in China. The results show that the volatility of stock price in China’s securities market is affected by investor sentiment and the impact has lag effect.