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The impact of Baidu Index sentiment on the volatility of China's stock markets

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  • Fang, Jianchun
  • Gozgor, Giray
  • Lau, Chi-Keung Marco
  • Lu, Zhou

Abstract

This paper examines the relationship between investor sentiment and the volatility of China's stock markets. We use the data from Baidu, China's leading search engine, for information on investor sentiment. In two different Generalized Autoregressive Conditional Heteroskedasticity (GARCH) models, the baseline model and the Baidu-Index extended model, we forecast the return volatility of China's stock markets. We find that the Baidu-Index extended model performs better than the baseline model. This paper shows that the search volume of relevant key words from Baidu Index improves volatility forecasting of China's stock markets.

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  • Fang, Jianchun & Gozgor, Giray & Lau, Chi-Keung Marco & Lu, Zhou, 2020. "The impact of Baidu Index sentiment on the volatility of China's stock markets," Finance Research Letters, Elsevier, vol. 32(C).
    • Handle: RePEc:eee:finlet:v:32:y:2020:i:c:s1544612318305609
    DOI: 10.1016/j.frl.2019.01.011
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    17. Deng, Chao & Zhou, Xiaoying & Peng, Cheng & Zhu, Huiming, 2022. "Going green: Insight from asymmetric risk spillover between investor attention and pro-environmental investment," Finance Research Letters, Elsevier, vol. 47(PA).
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    19. Elsayed, Ahmed H. & Gozgor, Giray & Yarovaya, Larisa, 2022. "Volatility and return connectedness of cryptocurrency, gold, and uncertainty: Evidence from the cryptocurrency uncertainty indices," Finance Research Letters, Elsevier, vol. 47(PB).
    20. Fang, Jianchun & Gozgor, Giray & Lau, Chi-Keung Marco & Wu, Wanshan & Yan, Cheng, 2020. "Listed zombie firms and top executive gender: Evidence from an emerging market," Pacific-Basin Finance Journal, Elsevier, vol. 62(C).
    21. Ekinci, Cumhur & Akyildirim, Erdinc & Corbet, Shaen, 2019. "Analysing the dynamic influence of US macroeconomic news releases on Turkish stock markets," Finance Research Letters, Elsevier, vol. 31(C), pages 155-164.
    22. Hussain, Shahzad & Akbar, Muhammad & Malik, Qaisar & Ahmad, Tanveer & Abbas, Nasir, 2021. "Downside Systematic Risk in Pakistani Stock Market: Role of Corporate Governance, Financial Liberalization and Investor Sentiment," CAFE Working Papers 14, Centre for Accountancy, Finance and Economics (CAFE), Birmingham City Business School, Birmingham City University.
    23. Gao, Haoyu & Li, Jinxuan & Wen, Huiyu, 2023. "Bank funding costs during the COVID-19 pandemic: Evidence from China," Pacific-Basin Finance Journal, Elsevier, vol. 79(C).

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