A dynamic analysis of the relationship between investor sentiment and stock market realized volatility: Evidence from China

Chen, Yanhui; Zhao, Hanhui; Li, Ziyu; Lu, Jinrong

doi:10.1371/journal.pone.0243080

Cited by 15 publications

(9 citation statements)

References 43 publications

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“…Researchers over the years have used various direct and indirect proxies to measure sentiment, but there are no universal proxies to measure investor sentiment (Aggarwal and Mohanty, 2018;Chen et al, 2020). Therefore, the first task is to measure the investor sentiment of the Indian investors by constructing an investor sentiment index.…”

Section: Measurement Of Sentimentmentioning

confidence: 99%

Investor Sentiment and Stock Market Returns: Evidence from the Indian Market

Yadav¹,

Chakraborty²

2022

purushartha

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Investor sentiment refers to investors' confidence in the market based on their subjective beliefs. Investor sentiment has become a topic of substantial interest among academicians as investor sentiment induces uninformed demand shocks, which can potentially drive away stock prices from their fundamental value. This study expands the literature on the effect of investor sentiment on stock market returns by constructing an Investor sentiment index for the Indian market. We use Nifty-Fifty returns and the sample period ranges from April 2012 to March 2022. The Principal Component Technique is employed to construct an investor sentiment index using seven market and firm implicit proxies: advances to decline ratio, buy-sell imbalance ratio, equity issues to total issues, volatility premium, share turnover, price-earnings ratio, and turnover volatility ratio. The regression analysis shows that the investor sentiment index has the predictive power to forecast Nifty-Fifty returns.

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Section: Measurement Of Sentimentmentioning

confidence: 99%

Investor Sentiment and Stock Market Returns: Evidence from the Indian Market

Yadav¹,

Chakraborty²

2022

purushartha

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“…The empirical results implied that the internet finance IS index has incremental forecast power of return comovement for stocks with larger market capitalization. Chen et al ( 2020 ) examined the dynamic linking between IS and stock market-realized volatility using the price data of SSE and Shenzhen Stock Exchange (SZSE). To construct the IS index, they used five proxy variables viz ., new stock accounts, turnover ratio, main balance, net active purchasing amount, and investor attention.…”

Section: Literature Review and Conceptual Frameworkmentioning

confidence: 99%

Cross Country Determinants of Investors' Sentiments Prediction in Emerging Markets Using ANN

Rao¹,

Kumar²,

Moonesar³

et al. 2022

Front. Artif. Intell.

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The paper models investor sentiments (IS) to attract investments for Health Sector and Growth in emerging markets, viz., India, Mainland China, and the UAE, by asking questions such as: What specific healthcare sector opportunities are available in the three markets? Are the USA-IS key IS predictors in the three economies? How important are macroeconomic and sociocultural factors in predicting IS in these markets? How important are economic crises and pandemic events in predicting IS in these markets? Is there contemporaneous relation in predicting IS across the three countries in terms of USA-IS, and, if yes, is the magnitude of the impact of USA-IS uniform across the three countries' IS? The artificial neural network (ANN) model is applied to weekly time-series data from January 2003 to December 2020 to capture behavioral elements in the investors' decision-making in these emerging economies. The empirical findings confirmed the superiority of the ANN framework over the traditional logistic model in capturing the cognitive behavior of investors. Health predictor—current health expenditure as a percentage of GDP, USA IS predictor—spread, and Macro-factor GDP—annual growth % are the common predictors across the 3 economies that positively impacted the emerging markets' IS behavior. USA (S&P 500) return is the only common predictor across the three economies that negatively impacted the emerging markets' IS behavior. However, the magnitude of both positive and negative impacts varies across the countries, signifying unique, diverse socioeconomic, cultural, and market features in each of the 3 economies. The results have four key implications: Firstly, US market sentiments are an essential factor influencing stock markets in these countries. Secondly, there is a need for developing a robust sentiment proxy on similar lines to the USA in the three countries. Thirdly, investment opportunities in the healthcare sector in these economies have been identified for potential investments by the investors. Fourthly, this study is the first study to investigate investors' sentiments in these three fast-emerging economies to attract investments in the Health Sector and Growth in the backdrop of UN's 2030 SDG 3 and SDG 8 targets to be achieved by these economies.

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“…According to the study of the a dynamic analysis of the relationship between investor sentiment and stock market realized volatility [4], they decided to choose five proxy variables to construct an investor sentiment index. Because the data indexes of different countries are different, they chose reasonable proxy variables in the Chinese stock market, which are the number of new stock accounts, margin balance, turnover rate, net active purchases, and investor attention.…”

Section: Proxy Variables That Reflect Investor Sentimentmentioning

confidence: 99%

“…For example, when the net active purchase volume is large or very large, it will also drive the strength of the stock price increase, which is positively correlated with the stock price assumption. As for Investor attention (SVI), the research shows that as the positive development of the stock market increases, the attention of investors also increases [4].…”

Section: Figure 1 Flow Chart For This Researchmentioning

confidence: 99%

How Investment Portfolio Reduce the Additional Risks from Investor Sentiment

Duan¹

2022

Proceedings of the 2022 7th International Conference on Financial Innovation and Economic Development (ICFIED 2022)

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The price of stocks is determined by the market, and the relationship between supply and demand affects the fluctuation of stock prices. However, the three main factors driving stock prices to rise or fall are fundamental factors, technical factors and market sentiment. The relationship between the market sentiment and investor sentiment is included. Therefore, this article will focus on the types of market sentiment and how investor sentiment affects the market. For example, when the market dries up, what background conditions will investors affect their risk tolerance? Next, this article will introduce a two-step principal component analysis method to construct an investor sentiment index based on the actual situation in China and the availability of data Sexual selection of five proxy variables. The five proxy variables are the number of newly opened stock accounts, turnover rate, margin balance, net active purchases and investor attention. The analytic method proves that as investor sentiment fluctuates, the five proxy variables will also fluctuate. Therefore, when these five proxy variables fluctuate violently, it proves that the market is also covered by investor sentiment. Finally, this article will use investment portfolios to reduce additional risk factors caused by emotions.

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A dynamic analysis of the relationship between investor sentiment and stock market realized volatility: Evidence from China

Cited by 15 publications

References 43 publications

Investor Sentiment and Stock Market Returns: Evidence from the Indian Market

Investor Sentiment and Stock Market Returns: Evidence from the Indian Market

Cross Country Determinants of Investors' Sentiments Prediction in Emerging Markets Using ANN

How Investment Portfolio Reduce the Additional Risks from Investor Sentiment

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