Abstract
This article describes the challenges that behavioral finance poses to traditional financial assumptions, from questioning the rationality of human behavior to explaining the classifications and three indicators of investor sentiment in behavioral finance. Furthermore, it confirms the combination of theory and practice by examining turnover ratio as a proxy indicator, the trading volume of closed-end funds, and stock price regression. It demonstrates that investor sentiment significantly influences stock prices. Moreover, it indicates that both investor sentiment and stock prices can mutually affect each other. Among the investor sentiment indicators, turnover ratio has a stronger impact on stock prices, while the trading volume of closed-end funds exhibits certain predictive functionality.
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