Investor Sentiment and Stock Market Returns: An Empirical Study based on Market Capitalization Scale Perspective

Di Zou

doi:10.54691/9cd7cp32

Authors

Di Zou

DOI:

https://doi.org/10.54691/9cd7cp32

Keywords:

Investor Sentiment; Stock Market Returns; E-Business; Principal Component Analysis; VAR Model.

Abstract

With the rise of behavioral finance, more and more scholars have begun to recognize the assumption of "limited rationality" of investors. Based on this, this paper employs empirical analysis methods to explore the mutual influence between investor sentiment and stock market returns across different market capitalization scales. The research results indicate that: (1) investor sentiment has a dual impact on the stock market returns of large, medium, and small-cap stocks, initially positive and subsequently negative, and the impact intensity increases as the market capitalization of the stock increases; (2) The returns of large-cap and mid-cap stocks have a significant positive impact on investor sentiment, while the impact of small-cap stock returns on investor sentiment is minimal.

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