Study on the Correlation between Investor Sentiment and Stock Price Co-movement

This paper empirically investigates the correlation between investor sentiment and stock price co-movement through a panel vector autoregressive model. The study divides investor sentiment into market sentiment, which represents the overall market attitude, and retail sentiment, which represents the attitude of retail investors, while the studied stock price co-movement refers to the linkage between individual stocks and the market. It is found that the relationship between investor sentiment and stock price co-movement shows a unidirectional effect. Investor sentiment can have an impact on stock price co-movement, however, stock price co-movement cannot significantly affect investor sentiment. Investor sentiment has a negative impact on stock price co-movement. Market sentiment has a significant impact on stock price co-movement, but retail sentiment has a non-significant impact on stock price linkage. This study is a further expansion of the research field on investor sentiment and stock price co-movement, providing a new regulatory perspective for regulator authorities and a new reference for investors to make rational investments.