Analysis of the Impact of Investor Sentiment on Stock Price Crash Risk

Abstract

The stability of the stock market is very important to the country. Some researchers have found that sentiment has an impact on stock price crash risk. However, research mainly focuses on media sentiment and company sentiment, and research on investor sentiment is not mature enough. This article collates the literature to explore the relationship between investor sentiment and stock price crash risk. This article provides a systematic classification of indicators that measure stock price crash risk. Then, when introducing the methods of measuring investor sentiment, the indicators for measuring investor sentiment are classified, and the scope of application of the three mainstream methods is summarized. This article introduces three models commonly used in the academic community for this problem and conducts a comparative analysis of the three mainstream models. Research has found a positive relationship between investor sentiment and stock price crash risk. As crisis sentiment rises, a large number of investors will begin to implement stop-loss strategies and even sell at extremely low prices to minimize losses. As a result, the likelihood of a stock market price crash increases significantly. In addition, the selection of data sets affects the measurement of investor sentiment to a great extent, and the development and utilization of alternative data is a future research direction. Beyond this, there is reverse causation between investor sentiment and stock price crash risk. Therefore, it is necessary to consider reducing or avoiding the impact of endogeneity problems when selecting a model.