Research on Investor Sentiment and Market Volatility in China’s Stock Market

DOI

10.2991/978-94-6463-874-5_28How to use a DOI?

Keywords

Investor Sentiment; Market Volatility; Policy Adjustment Effect

Abstract

The structure of China’s stock market, dominated by retail investors and characterized by frequent policy interventions, significantly differs from mature markets in terms of how investor sentiment influences market volatility. This paper, grounded in the unique context of China’s capital market, constructs a composite index of investor sentiment (CICSI) that integrates social media text sentiment, trading behavior, and policy shocks. Using high-frequency data from 2010 to 2022, regression analysis is employed to empirically test the time-varying relationship between investor sentiment and market volatility, as well as the moderating effect of policies. The study finds that incorporating sentiment analysis of stock forum comments increases the explanatory power of the sentiment index by 28.6% compared to traditional proxy variables, and policy shocks can trigger sustained structural changes in sentiment indicators. Sentiment has a significant asymmetric effect on market volatility, with the intensity of emotional impact transmission being 1.7 times higher during bull markets than during bear markets. Within 30 trading days after major policy announcements, the marginal impact of sentiment on volatility decreases by 43%, indicating that policy interventions can effectively curb excessive diffusion of sentiment.

Copyright

© 2025 The Author(s)

Open Access

Open Access This chapter is licensed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International License (http://creativecommons.org/licenses/by-nc/4.0/), which permits any noncommercial use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

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TY  - CONF
AU  - Sihan Hua
PY  - 2025
DA  - 2025/11/03
TI  - Research on Investor Sentiment and Market Volatility in China’s Stock Market
BT  - Proceedings of the 2025 International Conference on Financial Innovation and Marketing Management (FIMM 2025)
PB  - Atlantis Press
SP  - 221
EP  - 228
SN  - 2352-5428
UR  - https://doi.org/10.2991/978-94-6463-874-5_28
DO  - 10.2991/978-94-6463-874-5_28
ID  - Hua2025
ER  -