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A dynamic analysis of the relationship between investor sentiment and stock market realized volatility: Evidence from China

Investor sentiment is a research focus in behavior finance. This paper chooses five proxy variables according to China’s reality and uses a two-step principal component analysis to construct an investor sentiment index. The five proxy variables are the number of new stock accounts, turnover ratio, m...

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Detalles Bibliográficos
Autores principales: Chen, Yanhui, Zhao, Hanhui, Li, Ziyu, Lu, Jinrong
Formato: Online Artículo Texto
Lenguaje:English
Publicado: Public Library of Science 2020
Materias:
Acceso en línea:https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7717912/
https://www.ncbi.nlm.nih.gov/pubmed/33275622
http://dx.doi.org/10.1371/journal.pone.0243080
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author Chen, Yanhui
Zhao, Hanhui
Li, Ziyu
Lu, Jinrong
author_facet Chen, Yanhui
Zhao, Hanhui
Li, Ziyu
Lu, Jinrong
author_sort Chen, Yanhui
collection PubMed
description Investor sentiment is a research focus in behavior finance. This paper chooses five proxy variables according to China’s reality and uses a two-step principal component analysis to construct an investor sentiment index. The five proxy variables are the number of new stock accounts, turnover ratio, margin balance, net active purchasing amount, and investor attention. In the final part of this study, using the price data from the Shanghai and Shenzhen Security Exchange, this paper investigates the dynamic relationship between investor sentiment and stock market realized volatility based on the thermal optimal path. The empirical results show that when the market fluctuates severely, investor sentiment leads stock market realized volatility over one or two steps. The prediction power is also checked. The results indicate that investor sentiment indeed forecasts the realized volatility. This research supports regulators and financial institutions in taking advanced measures.
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spelling pubmed-77179122020-12-11 A dynamic analysis of the relationship between investor sentiment and stock market realized volatility: Evidence from China Chen, Yanhui Zhao, Hanhui Li, Ziyu Lu, Jinrong PLoS One Research Article Investor sentiment is a research focus in behavior finance. This paper chooses five proxy variables according to China’s reality and uses a two-step principal component analysis to construct an investor sentiment index. The five proxy variables are the number of new stock accounts, turnover ratio, margin balance, net active purchasing amount, and investor attention. In the final part of this study, using the price data from the Shanghai and Shenzhen Security Exchange, this paper investigates the dynamic relationship between investor sentiment and stock market realized volatility based on the thermal optimal path. The empirical results show that when the market fluctuates severely, investor sentiment leads stock market realized volatility over one or two steps. The prediction power is also checked. The results indicate that investor sentiment indeed forecasts the realized volatility. This research supports regulators and financial institutions in taking advanced measures. Public Library of Science 2020-12-04 /pmc/articles/PMC7717912/ /pubmed/33275622 http://dx.doi.org/10.1371/journal.pone.0243080 Text en © 2020 Chen et al http://creativecommons.org/licenses/by/4.0/ This is an open access article distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/by/4.0/) , which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited.
spellingShingle Research Article
Chen, Yanhui
Zhao, Hanhui
Li, Ziyu
Lu, Jinrong
A dynamic analysis of the relationship between investor sentiment and stock market realized volatility: Evidence from China
title A dynamic analysis of the relationship between investor sentiment and stock market realized volatility: Evidence from China
title_full A dynamic analysis of the relationship between investor sentiment and stock market realized volatility: Evidence from China
title_fullStr A dynamic analysis of the relationship between investor sentiment and stock market realized volatility: Evidence from China
title_full_unstemmed A dynamic analysis of the relationship between investor sentiment and stock market realized volatility: Evidence from China
title_short A dynamic analysis of the relationship between investor sentiment and stock market realized volatility: Evidence from China
title_sort dynamic analysis of the relationship between investor sentiment and stock market realized volatility: evidence from china
topic Research Article
url https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7717912/
https://www.ncbi.nlm.nih.gov/pubmed/33275622
http://dx.doi.org/10.1371/journal.pone.0243080
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