Investor Sentiment Index and Empirical Evidence from China''s Stock Market
投资者情绪指数及中国股市的实证

Investor sentiment can help people to correctly understand the mechanism of stock market, which further can be used to market regulation and investment strategy. On the basis of a comprehensive definition of investor sentiment, a theoretical analysis about the relationship between investor sentiment and spot return is given, and five hypotheses of investor sentiment are concluded. With the available proxies, the principal component analysis is used to build an investor sentiment index for China's stock market. EGARCH models are used to evaluate how movement of sentiment affects spot return and the different effects towards different types of stocks. These empirical results provide a good support for the theoretical analysis.