The Nonlinear Relationship between Investor Sentiment, Stock Return, and Volatility. (22nd March 2020)

• Record Type: Journal Article
• Authors: He, Gang; Zhu, Shuzhen; Gu, Haifeng
• Other Names: Qian Chuanxi Academic Editor.
• Is Part Of: Discrete dynamics in nature and society. Volume 2020(2020)
• Publication Date: 2020-03-22
• Subjects: System analysis -- Periodicals; Dynamics -- Periodicals; Chaotic behavior in systems -- Periodicals; Differentiable dynamical systems -- Periodicals; 003.05
• DOI: 10.1155/2020/5454625
• Languages: English
• ISSNs: 1026-0226

Abstract

Abstract : Based on the DSSW model, we analyze the nonlinear impact mechanism of investor sentiment on stock return and volatility by adjusting its hypothesis in Chinese stock market. We examine the relationship between investor sentiment, stock return, and volatility by applying OLS regression and quantile regression. Our empirical results show that the effects of investor sentiment on stock market return are asymmetric. There is "Freedman effect" in Chinese stock market, but only optimistic sentiment has a significant nonlinear impact on stock market returns when the stock market is a balanced market or a bear market. Meanwhile, "create the space effect" does exist in Chinese stock market too. It only exists when the market is in equilibrium, and only pessimistic sentiment has the nonlinear effect on stock market volatility.