Analysis on the Mean-Variance Effect of Investors'Extreme Sentiment

Abstract

Abstract:

By constructing the market sentiment index,this paper divides the investor sentiment into high,low and recovery periods,and investigates the influence of extreme sentiment on market mean-variance relationship.The results show that:in the whole sample period (Jan.2003-Jun.2016),there is no significant correlation between the market return (equal weight or circulation market value weight) and the conditional variance of the return;in the high sentiment period,there is a significant positive relationship between the equal weight market return and the variance of the return;in the low sentiment period,there is a significant negative correlation between the circulation market value weighted market return and the variance of the return.The paper shows that investor sentiment does have an effect on the market mean-variance relationship,and the investor sentiment has different impact on small-cap stocks and weighted stocks in the high and low investor sentiment periods.

Key words: investor sentiment, mean-variance relation, GARCH-M model

Dong Xiaowu, Zhang Xindong. Analysis on the Mean-Variance Effect of Investors'Extreme Sentiment[J]. , 2017, 29(6): 43-52.

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