Download pdf
The Influence of Investor Sentiment on Scale Effect of the A-Share Market: An Empirical Analysis of Principal Components
- 1 Southwestern University of Finance and Economics
* Author to whom correspondence should be addressed.
Abstract
Scale effect in the stock market refers to the negative correlation between company size and expected return, which is a common anomaly in the financial market. Investor sentiment is the opinion that investors create based on their expectations of the potential future cash flow from their assets and the inherent dangers of making investments. The initial goals of this paper were to develop an investor sentiment index system and investigate how it relates to the market scale impact. In this paper, principal component analysis and the CICSI index, which can better measure Chinese investor sentiment, are combined to construct investors More than 3000 sample stocks are grouped by size, the average return rate of each group is calculated, and the scale effect is tested. Through the verification of the scale effect under the optimistic, neutral, and pessimistic sentiment index, the applicability of generated sentiment index to the scale effect is confirmed.
Keywords
investor sentiment, scale effect, principal component analysis, CICSI index
[1]. Lu, R.: Lecture Notes in Behavioral Finance. CITIC Publishing Group, 30-88 (2019).
[2]. Kahneman, D.: Maps of Bounded Rationality: Psychology for Behavioral Economics. The American Economic Review, 93(5), 1449-1475 (2003).
[3]. Xu, C., & Wang, Y.: New thoughts on investor classification and investor sentiment. Management Review, 16(12), 46-50 (2004).
[4]. He, G., Zhu, S., & Gu, H.: Optimization study of investor sentiment proxy screening. Finance and Accounting Monthly (02), 163-168 (2018).
[5]. Lu, M.: A study on the measurement of investor sentiment and its effect on stock market volatility. Macroeconomic Research, 2022(9), 106-119 (2022).
[6]. Baker, M., & Wurgler, J.: Investor Sentiment and The Cross section of Stock Returns. The Journal of Finance, 61(4), (2006).
[7]. Cai, C. G., & Lai, M. M.: Construction and validity test of investor sentiment index for Chinese stock market. Financial Development Research, (7), 24-30 (2016).
[8]. Yi, C. G., Mao, N., & Geng, X. L.: Study on the development of investor sentiment index in Chinese stock market [DB/OL]. China Academy Journal Electronic Publishing House (1994-2008).
[9]. Banz, W. R.: The Relationship Between Return and Market Value of Common Stocks. Journal of Financial Economics, 9(1), (1981).
[10]. Zhao, Y.: An empirical study on the relationship between firm size and stock returns. Journal of Shanghai Institute of Finance (2), 25-30 (2006).
[11]. Xie, C., & Zeng, Z.: An empirical study of stock market liquidity premium. Quantitative Economics and Technical Economics Research (9), 143-154 (2005).
[12]. Jin, C., & Zhang, H.: Scale effect, value effect and asymmetric effect of liquidity premium in China's stock market. Economic Issues (1), 48-54 (2017).
[13]. Ji, L., & Zhuang, X.: A study of investor sentiment in the Chinese securities market. Management Science, 23(3), 79-87 (2010).
[14]. Li, Y., & Wang, L.: Stock market liquidity and asset pricing--an empirical study based on China's A-share market. Financial Development Research (7), 9-15 (2015).
[15]. Meng, W., Zhang, M., & Lu, J.: Research on the pricing of A-share conditional assets based on investor sentiment. Journal of Chongqing University: social science edition (22), (2016).
[16]. Han, L., & Wu, Y.: Investor Sentiment and the Puzzle of IPOs: Suppression or Premium. Management World (3), (2007).
Cite this article
Zhou,Y. (2023). The Influence of Investor Sentiment on Scale Effect of the A-Share Market: An Empirical Analysis of Principal Components. Advances in Economics, Management and Political Sciences,43,60-69.
Data availability
The datasets used and/or analyzed during the current study will be available from the authors upon reasonable request.
Disclaimer/Publisher's Note
The statements, opinions and data contained in all publications are solely those of the individual author(s) and contributor(s) and not of EWA Publishing and/or the editor(s). EWA Publishing and/or the editor(s) disclaim responsibility for any injury to people or property resulting from any ideas, methods, instructions or products referred to in the content.
About volume
Volume title: Proceedings of the 7th International Conference on Economic Management and Green Development
© 2024 by the author(s). Licensee EWA Publishing, Oxford, UK. This article is an open access article distributed under the terms and
conditions of the Creative Commons Attribution (CC BY) license. Authors who
publish this series agree to the following terms:
1. Authors retain copyright and grant the series right of first publication with the work simultaneously licensed under a Creative Commons
Attribution License that allows others to share the work with an acknowledgment of the work's authorship and initial publication in this
series.
2. Authors are able to enter into separate, additional contractual arrangements for the non-exclusive distribution of the series's published
version of the work (e.g., post it to an institutional repository or publish it in a book), with an acknowledgment of its initial
publication in this series.
3. Authors are permitted and encouraged to post their work online (e.g., in institutional repositories or on their website) prior to and
during the submission process, as it can lead to productive exchanges, as well as earlier and greater citation of published work (See
Open access policy for details).