Investor Sentiment Caused by Extreme Income and Extreme Volatility

In order to research the situation of the stock market extreme gains and extreme volatility how to have great influence on investor sentiment. This article selects the S&P 500 weekly closing price of American market and extracts yield and volatility sequences. Linear regression model is established on the basis of the difference between extreme and not extreme case to study the emotional change brought by extreme income and extreme volatility. The empirical results show: Except for the extreme negative earnings, other yield sequence can significantly stir up investor´s mood, among which the not extreme gains place the first in causing the investor´s emotional change in the United States; Extreme positive yield have more significant effect on investor sentiment than extreme negative yield; Volatility cannot affect all investor´s sentiment effectively and steadily, thus it has limited explanation on investor sentiment.