The Influence of Investor Sentiment on Stock Market

Abstract

By combining economics, psychology, and neuroscience, behavioral finance aims to analyze how human emotions and biases influence financial decision-making. The research utilizes the Investor Sentiment Index (CICSI) as a tool to measure market sentiment and examines its correlation with variables such as IPO first-day returns, turnover rate, and new account openings. The findings demonstrate that investor sentiment significantly impacts market behavior. This suggests that individual emotions and cognitive biases play a crucial role in shaping market trends. These conclusions provide valuable insights for investors, financial analysts, and policymakers seeking to better understand and predict market behavior. By incorporating behavioral finance insights into traditional financial models, a more comprehensive understanding of financial markets can be achieved, enabling informed decision-making.