Stock market behavior and investor sentiment: Evidence from China
© Higher Education Press and Springer-Verlag GmbH 2008
Received: 14 November 2007
Published: 30 July 2008
The relationship among stock returns, market volatilities and individual investor sentiment is an important topic in behavioral economics and finance. This paper uses a unique data set—China’s newly opened stock trading accounts to test the relationships among stock returns, volatilities and individual investor sentiment in the Chinese stock market. It is found that there is a positive relationship between shifts in sentiment and stock returns, and that shifts in sentiment are negatively correlated with market volatility, that is to say, volatility increases (decreases) when investors become more bearish (bullish).