Pollet and Wilson said that the average correlation-return relation will be better than the mean-variance relation as proxy for the overall risk-return relation in the capital market. The correlation between investor sentiment and the average correlation-return relation is studied in this paper. After using data from 2001 to 2011 in the Chinese stock market to construct a investor sentiment index, the following empirical results are obtained. Compared with the stock market variance, the average correlation's ability is better than the stock market variance in forcasting earings, while in the low-sentiment periods, the average correlation-return relation is not significant, but during the high-sentiment periods, average correlation-return relation has been weakened significantly, even become a negative correlation. This shows that high sentiment will weaken the overall risk-return relationship. The conclusions' robustness has been proved in the subsequent robustness test, which shows a new mechanism of investor sentiment's influence on expected returns.
GAO Da-liang, LIU Zhi-feng, YANG Xiao-guang
. Investor Sentiment,Average Correlation and Stock Market Returns[J]. Chinese Journal of Management Science, 2015
, 23(2)
: 10
-20
.
DOI: 10.16381/j.cnki.issn1003-207x.2015.02.002
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