The extreme return and extreme volatility have great influences on the
investor sentiment in stock market. However, few researchers have taken the
phenomenon into consideration. In this paper, we first distinguish the
extreme situations from non-extreme situations. Then we use the ordinary
generalized least squares and quantile regression methods to estimate a
linear regression model by applying the standardized AAII, the return and
volatility of SP 500. The results indicate that, except for extremely
negative return, other return sequences can cause great changes in investor
sentiment, and non-extreme return plays a leading role in affecting the
overall American investor sentiment. Extremely positive (negative) return can
rapidly improve (further reduce) the level of investor sentiment when
investors encounter extremely pessimistic situations. The impact gradually
decreases with improvement of the sentiment until the situation turns
optimistic. In addition, we find that extreme and non-extreme volatility
cannot a_ect the overall investor sentiment.