Investor sentiment and security market returns

Author: Han Zexian/Ren Youquan
Publisher:
Publish Date: 2006-04-01
Features: The significance of this book lies first and foremost in presenting the relationship between investor sentiment and the securities market from the perspective of behavioral finance, combining extensive literature and personal reflections. However, with my limited academic capabilities, the short span of less than two years of intellectual pursuit, and the modest scope of only tens of thousands of words, it is difficult to conduct a comprehensive study of investor sentiment. Therefore, I can only select a specific angle—namely, the relationship between investor sentiment and market returns—to conduct some empirical research. The remaining parts will have to wait for the future and other scholars. The significance of researching investor sentiment can be summarized in at least four points:
1. It helps to understand investor behavior in financial markets.
2. It facilitates the understanding of the mutual mechanisms among market returns, volatility, and trading volume.
3. It aids in revealing investors' biases in stock predictions and the potential to earn excess returns by exploiting these biases.
4. It helps to grasp investors' psychological characteristics, providing theoretical guidance for market regulation.