Investor Sentiment and Chinese Stock Market Returns under Pandemic Outbreak
(2021) NEKN02 20211Department of Economics
- Abstract
- One year and a half after the covid-19 rapidly spread over China in the end of 2019, China has well-controlled the pandemic situation with only limited small outbreaks in space and time. However, at the beginning of the devastating epidemic, the normal arrangement of the country was disturbed. It is notable that the stock market experienced sharp fall during that time, which triggered our interest of what factors that have interactions with the fluctuations of stock market return. This paper focuses on the dynamic relationship with the investor sentiment and the Chinese stock market return under the effect of covid-19. The research firstly constructed a comprehensive investor sentiment from six proxy variables by principal component... (More)
- One year and a half after the covid-19 rapidly spread over China in the end of 2019, China has well-controlled the pandemic situation with only limited small outbreaks in space and time. However, at the beginning of the devastating epidemic, the normal arrangement of the country was disturbed. It is notable that the stock market experienced sharp fall during that time, which triggered our interest of what factors that have interactions with the fluctuations of stock market return. This paper focuses on the dynamic relationship with the investor sentiment and the Chinese stock market return under the effect of covid-19. The research firstly constructed a comprehensive investor sentiment from six proxy variables by principal component analysis. Second, a vector autoregression model is built with the comprehensive index of investor sentiment and daily market return rate of the Shanghai Stock Exchange A- share market. Finally, a Granger causality analysis is performed, and the impulse response and variance decomposition are derived to study the relationship between these two variables. The paper finds that during the pandemic, the causal relationship between investor sentiment and market return rate was one-way, i.e., the market return rate did Granger cause investor sentiment. Furthermore, the market return positively affected the investor sentiment in the long run, while the excitement of investors would soon be ebbed in the next month. (Less)
Please use this url to cite or link to this publication:
http://lup.lub.lu.se/student-papers/record/9052390
- author
- Zhu, Shijie LU and Lyu, Yu
- supervisor
- organization
- course
- NEKN02 20211
- year
- 2021
- type
- H1 - Master's Degree (One Year)
- subject
- keywords
- Investor sentiment, Chinese stock market, Principal Component Analysis, Vector Autoregression model, Granger causality test
- language
- English
- id
- 9052390
- date added to LUP
- 2021-10-26 08:18:57
- date last changed
- 2021-10-26 08:18:57
@misc{9052390,
abstract = {{One year and a half after the covid-19 rapidly spread over China in the end of 2019, China has well-controlled the pandemic situation with only limited small outbreaks in space and time. However, at the beginning of the devastating epidemic, the normal arrangement of the country was disturbed. It is notable that the stock market experienced sharp fall during that time, which triggered our interest of what factors that have interactions with the fluctuations of stock market return. This paper focuses on the dynamic relationship with the investor sentiment and the Chinese stock market return under the effect of covid-19. The research firstly constructed a comprehensive investor sentiment from six proxy variables by principal component analysis. Second, a vector autoregression model is built with the comprehensive index of investor sentiment and daily market return rate of the Shanghai Stock Exchange A- share market. Finally, a Granger causality analysis is performed, and the impulse response and variance decomposition are derived to study the relationship between these two variables. The paper finds that during the pandemic, the causal relationship between investor sentiment and market return rate was one-way, i.e., the market return rate did Granger cause investor sentiment. Furthermore, the market return positively affected the investor sentiment in the long run, while the excitement of investors would soon be ebbed in the next month.}},
author = {{Zhu, Shijie and Lyu, Yu}},
language = {{eng}},
note = {{Student Paper}},
title = {{Investor Sentiment and Chinese Stock Market Returns under Pandemic Outbreak}},
year = {{2021}},
}