Volume 29, Issue 1
DOI: 10.24205/03276716.2020.65
INFLUENCE OF INVESTOR SENTIMENT ON THE RETURN RATE OF TRANSNATIONAL INVESTMENT BEHAVIOUR
Abstract
Despite its rapid growth, the transnational investment market in China is not as mature as the capital markets in developed countries. The anomalies in China’s transnational investment market are difficult to be explained by traditional financial theories like market efficiency theory. Drawing on the behavioural finance theory, this paper empirically studies how investor sentiment affects the return rate of transnational investment behavior. Several proxy variables were selected and fitted to the composite index of investor sentiment using principal component analysis. The empirical data were collected from China’s transnational investment market from January 2010 to January 2019. Through the data analysis, it is concluded that investor sentiment has a significant positive impact on future market returns; an optimistic investor sentiment improves the return rate of the market, and a pessimistic investor sentiment suppresses the return rate of the market. The research findings promote the healthy and rapid development of the transnational investment market.
Keywords
Investor Sentiment, Transnational Investment, Return Rate, Behavioural Finance.