Interactive Relationship between Individual Investor Sentiment and Institutional Investor Sentiment

In the present work, the interactive relationship between individual investor sentiment and institutional investor sentiment is explored based on data spanning seven years from 2016 to 2022. First, monthly new account opening numbers are selected as the single indicator to construct separate indicators for individual investor sentiment and institutional investor sentiment. Subsequently, empirical analysis is conducted using polynomial distributed lag models (PDLs) to capture contemporaneous relationships and vector autoregressive (VAR) models to study lagged relationships. The results indicate a lead-lag relationship between individual investor sentiment and institutional investor sentiment. Additionally, Individual investor sentiment having a more significant impact on institutional investor sentiment. Last, recommendations are provided based on the research findings to mitigate investment risks and reduce stock market volatility.