Quantifying the Cross-Correlations between Online Market Participation Willingness and Stock Market Dynamics

Abstract

The investors’ market participation willingness plays a vital role in the decision-making process of asset allocation. With the newly emerged dataset of investors’ market participation willingness, this paper provides the first evidence on the dynamic relationship between market participation willingness and the market dynamics in the Chinese stock market. We select four typical Chinese stock market indices, i.e., SSE50 Index, CSI300 Index, Small and Medium Enterprise Market Index, and Growth Enterprise Market Index, to represent different aspects of the Chinese stock market. Moreover, we use mutual information to measure the overall dependence between market participation willingness and stock market and employ the DCCA cross-correlation coefficient and MF-DCCA to investigate the cross-correlation between market participation willingness and market dynamics. We find that there exist overall dependence and power-law cross-correlation between market participation willingness and the Chinese stock market, and the cross-correlations are significantly multifractal.