LINKAGE AND SPILLOVER EFFECTS OF CHINA'S CARBON MARKET AND STOCK MARKET UNDER THE BACKGROUND OF CARBON NEUTRALITY: AN ANALYSIS BASED ON INVESTOR SENTIMENT REGULATION
Authors: Qi Huibo , Liu Chang , Long Fei , Gao Xiaowei , Hu Leifang , Wu Qitao 
Published: July 2022

Abstract

Background
In September 2020, China put forward the goal of carbon neutrality by 2060, which is of great and far-reaching significance for coping with climate change, achieving sustainable development and promoting the transformation of energy structure. In this context, the carbon market has become an important policy tool to realize China's vision of carbon neutralization. As can be seen from the stock market, the carbon neutralization industrial chain is evolving, and green and low-carbon has become the main investment trend. Therefore, in the context of carbon neutrality, whether there is a connection between China's carbon market and stock market, whether there is spillover effect between them, and what will be based on investors' emotional behavior are the main problems to be solved in this study.

Subjects and Methods
This paper takes China's carbon market, carbon neutralization concept stock market and thermal power stock market as the main research objects; This paper uses the price index and VaR BEKK GARCH model from January 1, 2019 to December 31, 2020 to study the interaction and spillover effect between the above markets. It also reveals the reasons from the perspective of investment psychology. In order to better study the changes of investors' emotional perception and behavior, this study uses the self rating Depression Scale (SDS) system William W K. Zung compiled the self rating scale in 1965 to measure the severity of depression and its changes in treatment. In 1972, Zung added the corresponding examiner's book and changed the self-evaluation to other evaluation, which is called Depression Status Inventory (DSI). The assessment time span is the latest week. Content: SDS and DSI are composed of 20 declarative sentences and corresponding question entries respectively. Each item is equivalent to a relevant symptom, which is scored on a scale of 1-4. 20 items reflect depression, and four groups of specific symptoms: 1 Psychotic affective symptoms, including depression and crying; 2. Somatic disorders, including eight items: daytime differences in mood, sleep disorders, anorexia, decreased libido, weight loss, constipation, tachycardia and fatigue; 3. Psychomotor disorders, including psychomotor retardation and agitation; 4. Psychological disorders of depression include eight items: confusion of thinking, hopelessness, irritability, indecision, self depreciation, emptiness, repeated thinking, suicide and dissatisfaction. From the scoring method: each item is scored according to four levels: 1, 2, 3 and 4. Ask the subject to read each statement carefully, or the examiner to ask questions one by one, and circle 1 (from none or occasionally), or 2 (sometimes), or 3 (often), or 4 (always) according to the time and frequency most suitable for the subject's situation. Among the 20 items, 10 items (items 2, 5, 6, 11, 12, 14, 16, 17, 18 and 20) are stated with positive words, which are scored in reverse order, and the remaining 10 items are stated with negative words, which are scored in the order of 1-4 above. The depression severity index assessed by SDS and DSI is calculated according to the following formula: depression severity index - cumulative score of each item / 80 (maximum total score). The index range is 0.25-1.0. The higher the index, the heavier the degree of depression.

Results
2019 coronavirus disease has a significant impact on the relationship between carbon market and stock market. (1) Affected by 2019 coronavirus disease, CTI first affects cni300 and then TPI; Investors' expectations of earnings are distorted by the extension of the current trend. (2) The two-way average spillover effect between TPI and Guoxin 300 in 2019 has become the one-way average spillover effect in 2020. Investors' psychological bias and thinking shortcuts make them choose to invest in familiar fields. These areas cannot spread investment risks, but will damage their long-term wealth. (3) The amplitudes of cni300 and TPI will change dramatically with historical fluctuations, which confirms that most people's judgment on the profit and loss mentioned in the prospect theory is usually determined according to the reference point. The results showed that impulsive investment was negatively correlated with economic support ability (P &lt; 0.01), and its internal consistency was satisfactory: odd and even items split half correlation: 0.73 (1973) and 0.92. There was a high and moderate correlation between the scores of “d” subscale of MMPI. Zung et al. Also compared the scores of SDS and dis with CG1 score and proposed that those with SDS and dis score index below 0.5 were non depressed; 0.50-0.59 is mild to mild depression; 0.60-0.69 is moderate to severe depression; more than 0.70 is severe depression.

Conclusion
This shows the confidence of Chinese investors in the national sustainable development initiative. Carbon market performance has become an important reference for investing in carbon neutral concept stocks. Therefore, the government should constantly promote the innovation of carbon trading system while stabilizing the expected return on green and low-carbon investment. In addition, the government should take multiple measures to send sufficient and accurate signals on specific measures to promote carbon neutralization, eliminate unreasonable investment to the greatest extent, and guide the industrial layout through the capital market.

Acknowledgements
This manuscript was supported by the National Natural Science Foundation of China (71473230) (71803180), and the Philosophy and Social Sciences Planning Project of the Ministry of Education in China (18YJCZH140) (17YJCZH048).