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Web of Proceedings - Francis Academic Press
Web of Proceedings - Francis Academic Press

Research on the Influence of Investor Sentiment Based on Principal Component Analysis on Shanghai Composite Index

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DOI: 10.25236/iemb.2021.024


Danya Tang

Corresponding Author

Danya Tang


In recent years, great changes have taken place in Chinese financial market, and Chinese stock market has also experienced multiple bull and bear markets. Behind the sharp rise and fall of the stock market, the change of investor sentiment plays an important role. This paper uses principal component analysis to construct an investor sentiment index with the following six indexes: market turnover, market trading volume, number of IPOs, consumer confidence index, number of newly opened accounts and P/E ratio, and excludes the influence of three macroeconomic factors: consumer price index, producer price index and Chinese macroeconomic prosperity index. Then, based on the time series data of investor sentiment and the closing price of Shanghai Composite Index, this paper builds a linear regression model for analysis, and finds that the former has a significant positive impact on the latter. Finally, on this basis, this paper puts forward relevant policy recommendations.


Investor sentiment, closing price of Shanghai Composite Index, principal component analysis, time series data