The Relationship between Shanghai Composite Index Yield and Investors’ Sentiment Index: Using the Northbound Capital in Chinese Stock Market as the Proxy Variable for Investors’ Sentiment

The northward fund is known as smart capital in China's stock market. Some funds and investors regard the inflow and outflow of northbound capital as one of the guiding principles of investment. This paper uses northbound capital as a proxy variable of investor sentiment to study the correlation between it and the return rate of the stock market. In this paper, data from 2016 to 2019 are selected and the Shanghai Composite Index is taken as an indicator to measure the stock market return rate. In this paper, the ARMA-GARCH time series model is applied to analyze the characteristics of the two variables, and according to the results of the Granger causality test, it is concluded that the stock market return rate is a significant influencing factor of investor sentiment, but the reverse is not true.