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Research on the Impact of Investor Sentiment on Chinese Stock Pricing
- 1 Institution of The University of Melbourne, City: Melbourne, ZIP Code: 3052, Country: Australia
* Author to whom correspondence should be addressed.
Abstract
Asset pricing has always been one of the core topics in finance research. Traditional asset pricing theory builds a multi-factor pricing model based on market and company fundamentals and verifies it through empirical data. However, financial markets often exhibit irrational characteristics, and market efficiency theory and investor rationality assumptions cannot fully explain abnormal phenomena in the market. Therefore, behavioral finance has gradually emerged, expanding the framework of asset pricing models by introducing investor behavior and emotional factors. This study aims to explore the impact of investor sentiment on Chinese stock market pricing. By analyzing the monthly data of the Chinese stock market, the traditional Fama-French three-factor model was constructed, and on this basis, the sentiment factor was added to propose a new four-factor model. Research results show that the sentiment factor (SENT) has a significant impact on the returns of small-cap stocks and low price-to-book ratio stocks, especially during periods of large mood swings. Changes in investor sentiment often trigger irrational trading, leading to stock price declines. Reverse fluctuations. Compared with the three-factor model, the four-factor model has a better fitting effect in explaining stock market returns, further proving the importance of emotional factors in the Chinese stock market. This study not only fills the gap in the existing literature on investor sentiment in the Chinese stock market but also provides a theoretical basis for localized adjustment of multi-factor pricing models.
Keywords
Investor Sentimental, Overconfidence, Stock Price, Behavioral Finance
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Cite this article
Hao,B. (2025). Research on the Impact of Investor Sentiment on Chinese Stock Pricing. Advances in Economics, Management and Political Sciences,168,10-15.
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