A New Investor Sentiment Index Model and Its Application in Stock Price Prediction and Systematic Risk Estimation of Bull and Bear Market

Qiansheng Zhang; Sichuang Hu; Libo Chen; Ruixi Lin; Wan Zhang; Ruiying Shi

doi:doi:10.11648/j.ijfbr.20190501.11

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A New Investor Sentiment Index Model and Its Application in Stock Price Prediction and Systematic Risk Estimation of Bull and Bear Market

Qiansheng Zhang, Sichuang Hu, Libo Chen, Ruixi Lin, Wan Zhang, Ruiying Shi

Published in International Journal of Finance and Banking Research (Volume 5, Issue 1)

Received: 4 October 2018 Accepted: 17 December 2018 Published: 15 March 2019

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Abstract

Many studies in recent years have shown that investor sentiment affects investor decision-making, which in turn affects stock market volatility and the direction of stock market prices. Since behavioral finance researchers find that linear combinations of stock turnover and popularity indices can greatly reflect stock investor sentiment, this paper aims to construct a new investor sentiment index that can be reasonably applied to predict stock market risk by selecting rational factors. A new investor sentiment index model is first proposed by combining specific monthly new account ratio (SNIA), monthly turnover rate (TOR), popularity index AR, delayed yield (DY) and using principal component analysis approach. Secondly, the indicator is statistically tested. The results of the correlation analysis show that the investor sentiment index is positively correlated with the monthly rate of return, and the result of causal analysis reveals that the investor sentiment index is the Granger cause of the change in yield. Thirdly, a new method is designed to predict the stock price trend by using the presented investor sentiment index. Finally, based on VaR and CoVaR model the investor sentiment index can be utilized to forecast and estimate of systematic risk in the bull or bear market.

Published in	International Journal of Finance and Banking Research (Volume 5, Issue 1)
DOI	10.11648/j.ijfbr.20190501.11
Page(s)	1-8
Creative Commons	This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.
Copyright	Copyright © The Author(s), 2019. Published by Science Publishing Group

Keywords

Investor Sentiment Index, Principal Component Analysis, Prediction of Stock Price, Systematic Risk, Condition at Risk

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APA Style

Qiansheng Zhang, Sichuang Hu, Libo Chen, Ruixi Lin, Wan Zhang, et al. (2019). A New Investor Sentiment Index Model and Its Application in Stock Price Prediction and Systematic Risk Estimation of Bull and Bear Market. International Journal of Finance and Banking Research, 5(1), 1-8. https://doi.org/10.11648/j.ijfbr.20190501.11

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ACS Style

Qiansheng Zhang; Sichuang Hu; Libo Chen; Ruixi Lin; Wan Zhang, et al. A New Investor Sentiment Index Model and Its Application in Stock Price Prediction and Systematic Risk Estimation of Bull and Bear Market. Int. J. Finance Bank. Res. 2019, 5(1), 1-8. doi: 10.11648/j.ijfbr.20190501.11

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AMA Style

Qiansheng Zhang, Sichuang Hu, Libo Chen, Ruixi Lin, Wan Zhang, et al. A New Investor Sentiment Index Model and Its Application in Stock Price Prediction and Systematic Risk Estimation of Bull and Bear Market. Int J Finance Bank Res. 2019;5(1):1-8. doi: 10.11648/j.ijfbr.20190501.11

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@article{10.11648/j.ijfbr.20190501.11,
  author = {Qiansheng Zhang and Sichuang Hu and Libo Chen and Ruixi Lin and Wan Zhang and Ruiying Shi},
  title = {A New Investor Sentiment Index Model and Its Application in Stock Price Prediction and Systematic Risk Estimation of Bull and Bear Market},
  journal = {International Journal of Finance and Banking Research},
  volume = {5},
  number = {1},
  pages = {1-8},
  doi = {10.11648/j.ijfbr.20190501.11},
  url = {https://doi.org/10.11648/j.ijfbr.20190501.11},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijfbr.20190501.11},
  abstract = {Many studies in recent years have shown that investor sentiment affects investor decision-making, which in turn affects stock market volatility and the direction of stock market prices. Since behavioral finance researchers find that linear combinations of stock turnover and popularity indices can greatly reflect stock investor sentiment, this paper aims to construct a new investor sentiment index that can be reasonably applied to predict stock market risk by selecting rational factors. A new investor sentiment index model is first proposed by combining specific monthly new account ratio (SNIA), monthly turnover rate (TOR), popularity index AR, delayed yield (DY) and using principal component analysis approach. Secondly, the indicator is statistically tested. The results of the correlation analysis show that the investor sentiment index is positively correlated with the monthly rate of return, and the result of causal analysis reveals that the investor sentiment index is the Granger cause of the change in yield. Thirdly, a new method is designed to predict the stock price trend by using the presented investor sentiment index. Finally, based on VaR and CoVaR model the investor sentiment index can be utilized to forecast and estimate of systematic risk in the bull or bear market.},
 year = {2019}
}

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TY  - JOUR
T1  - A New Investor Sentiment Index Model and Its Application in Stock Price Prediction and Systematic Risk Estimation of Bull and Bear Market
AU  - Qiansheng Zhang
AU  - Sichuang Hu
AU  - Libo Chen
AU  - Ruixi Lin
AU  - Wan Zhang
AU  - Ruiying Shi
Y1  - 2019/03/15
PY  - 2019
N1  - https://doi.org/10.11648/j.ijfbr.20190501.11
DO  - 10.11648/j.ijfbr.20190501.11
T2  - International Journal of Finance and Banking Research
JF  - International Journal of Finance and Banking Research
JO  - International Journal of Finance and Banking Research
SP  - 1
EP  - 8
PB  - Science Publishing Group
SN  - 2472-2278
UR  - https://doi.org/10.11648/j.ijfbr.20190501.11
AB  - Many studies in recent years have shown that investor sentiment affects investor decision-making, which in turn affects stock market volatility and the direction of stock market prices. Since behavioral finance researchers find that linear combinations of stock turnover and popularity indices can greatly reflect stock investor sentiment, this paper aims to construct a new investor sentiment index that can be reasonably applied to predict stock market risk by selecting rational factors. A new investor sentiment index model is first proposed by combining specific monthly new account ratio (SNIA), monthly turnover rate (TOR), popularity index AR, delayed yield (DY) and using principal component analysis approach. Secondly, the indicator is statistically tested. The results of the correlation analysis show that the investor sentiment index is positively correlated with the monthly rate of return, and the result of causal analysis reveals that the investor sentiment index is the Granger cause of the change in yield. Thirdly, a new method is designed to predict the stock price trend by using the presented investor sentiment index. Finally, based on VaR and CoVaR model the investor sentiment index can be utilized to forecast and estimate of systematic risk in the bull or bear market.
VL  - 5
IS  - 1
ER  -

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Author Information

Qiansheng Zhang

School of Mathematics and Statistics, Guangdong University of Foreign Studies, Guangzhou, China
Sichuang Hu

School of Finance, Guangdong University of Foreign Studies, Guangzhou, China
Libo Chen

School of Finance, Guangdong University of Foreign Studies, Guangzhou, China
Ruixi Lin

School of Finance, Guangdong University of Foreign Studies, Guangzhou, China
Wan Zhang

School of Finance, Guangdong University of Foreign Studies, Guangzhou, China
Ruiying Shi

School of Finance, Guangdong University of Foreign Studies, Guangzhou, China

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APA Style

Qiansheng Zhang, Sichuang Hu, Libo Chen, Ruixi Lin, Wan Zhang, et al. (2019). A New Investor Sentiment Index Model and Its Application in Stock Price Prediction and Systematic Risk Estimation of Bull and Bear Market. International Journal of Finance and Banking Research, 5(1), 1-8. https://doi.org/10.11648/j.ijfbr.20190501.11

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ACS Style

Qiansheng Zhang; Sichuang Hu; Libo Chen; Ruixi Lin; Wan Zhang, et al. A New Investor Sentiment Index Model and Its Application in Stock Price Prediction and Systematic Risk Estimation of Bull and Bear Market. Int. J. Finance Bank. Res. 2019, 5(1), 1-8. doi: 10.11648/j.ijfbr.20190501.11

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AMA Style

Qiansheng Zhang, Sichuang Hu, Libo Chen, Ruixi Lin, Wan Zhang, et al. A New Investor Sentiment Index Model and Its Application in Stock Price Prediction and Systematic Risk Estimation of Bull and Bear Market. Int J Finance Bank Res. 2019;5(1):1-8. doi: 10.11648/j.ijfbr.20190501.11

Copy | Download

@article{10.11648/j.ijfbr.20190501.11,
  author = {Qiansheng Zhang and Sichuang Hu and Libo Chen and Ruixi Lin and Wan Zhang and Ruiying Shi},
  title = {A New Investor Sentiment Index Model and Its Application in Stock Price Prediction and Systematic Risk Estimation of Bull and Bear Market},
  journal = {International Journal of Finance and Banking Research},
  volume = {5},
  number = {1},
  pages = {1-8},
  doi = {10.11648/j.ijfbr.20190501.11},
  url = {https://doi.org/10.11648/j.ijfbr.20190501.11},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijfbr.20190501.11},
  abstract = {Many studies in recent years have shown that investor sentiment affects investor decision-making, which in turn affects stock market volatility and the direction of stock market prices. Since behavioral finance researchers find that linear combinations of stock turnover and popularity indices can greatly reflect stock investor sentiment, this paper aims to construct a new investor sentiment index that can be reasonably applied to predict stock market risk by selecting rational factors. A new investor sentiment index model is first proposed by combining specific monthly new account ratio (SNIA), monthly turnover rate (TOR), popularity index AR, delayed yield (DY) and using principal component analysis approach. Secondly, the indicator is statistically tested. The results of the correlation analysis show that the investor sentiment index is positively correlated with the monthly rate of return, and the result of causal analysis reveals that the investor sentiment index is the Granger cause of the change in yield. Thirdly, a new method is designed to predict the stock price trend by using the presented investor sentiment index. Finally, based on VaR and CoVaR model the investor sentiment index can be utilized to forecast and estimate of systematic risk in the bull or bear market.},
 year = {2019}
}

Copy | Download

TY  - JOUR
T1  - A New Investor Sentiment Index Model and Its Application in Stock Price Prediction and Systematic Risk Estimation of Bull and Bear Market
AU  - Qiansheng Zhang
AU  - Sichuang Hu
AU  - Libo Chen
AU  - Ruixi Lin
AU  - Wan Zhang
AU  - Ruiying Shi
Y1  - 2019/03/15
PY  - 2019
N1  - https://doi.org/10.11648/j.ijfbr.20190501.11
DO  - 10.11648/j.ijfbr.20190501.11
T2  - International Journal of Finance and Banking Research
JF  - International Journal of Finance and Banking Research
JO  - International Journal of Finance and Banking Research
SP  - 1
EP  - 8
PB  - Science Publishing Group
SN  - 2472-2278
UR  - https://doi.org/10.11648/j.ijfbr.20190501.11
AB  - Many studies in recent years have shown that investor sentiment affects investor decision-making, which in turn affects stock market volatility and the direction of stock market prices. Since behavioral finance researchers find that linear combinations of stock turnover and popularity indices can greatly reflect stock investor sentiment, this paper aims to construct a new investor sentiment index that can be reasonably applied to predict stock market risk by selecting rational factors. A new investor sentiment index model is first proposed by combining specific monthly new account ratio (SNIA), monthly turnover rate (TOR), popularity index AR, delayed yield (DY) and using principal component analysis approach. Secondly, the indicator is statistically tested. The results of the correlation analysis show that the investor sentiment index is positively correlated with the monthly rate of return, and the result of causal analysis reveals that the investor sentiment index is the Granger cause of the change in yield. Thirdly, a new method is designed to predict the stock price trend by using the presented investor sentiment index. Finally, based on VaR and CoVaR model the investor sentiment index can be utilized to forecast and estimate of systematic risk in the bull or bear market.
VL  - 5
IS  - 1
ER  -

Copy | Download