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\begin{document}

\title{the Dynamic Portfolio Strategy employing the Investor Sentiment under
Stochastic Environment}



\author[1]{Qian Feng}%
\author[1]{Ting Li}%
\author[1]{Zhenyong Li}%
\affil[1]{Ningxia University}%


\vspace{-1em}



  
  \date{May 14, 2024}


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\selectlanguage{english}
\begin{abstract}
Several kinds of research have proved that the overall investor
sentiment has a non-negligible impact on the return of the stocks.
Meanwhile, there exist many irrational elements in the overall investor
sentiment. However, little research has been conducted on how rational
investors can better arrange their investment strategies in the face of
this complex situation. Our manuscript explores the dynamic optimal
portfolio of the returns of the stock affected by the sentiment of the
investors. Applying the approach of the stochastic control, the HJB
equation of the final wealth is constructed. Hence, the optimal
investment strategy and the effective frontier are obtained employing
the Legendre transformation and the duality theory. An illustrative
example is provided to support our theoretical model. Taking into
account the overall investor sentiment and its irrational components, a
rational investor would do not invest so much in the stocks during the
periods of the negative sentiment or the period of being excessively
positive sentiment. Furthermore, the sentiment-adjusted mean-variance
relation has been derived from our model that still adopts the principle
of the Security Market Line (SML).%
\end{abstract}%



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\textbf{Hosted file}

\verb`The Dynamic Portfolio Strategy employing the Investor Sentiment under Stochastic Environment.doc`  available at \url{https://authorea.com/users/327815/articles/455240-the-dynamic-portfolio-strategy-employing-the-investor-sentiment-under-stochastic-environment}\selectlanguage{english}
\begin{figure}[H]
\begin{center}
\includegraphics[width=0.70\columnwidth]{figures/Figure-1-The-impact-of-over-investor-sentiment-on-the-optimal-investment-strategy/Figure-1-The-impact-of-over-investor-sentiment-on-the-optimal-investment-strategy}

\end{center}
\end{figure}\selectlanguage{english}
\begin{figure}[H]
\begin{center}
\includegraphics[width=0.70\columnwidth]{figures/Figure-2-The-impact-of-overall-investor-sentiment-on-the-standard-deviation/Figure-2-The-impact-of-overall-investor-sentiment-on-the-standard-deviation}

\end{center}
\end{figure}

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