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The impact of investor sentiment index on stock market crash risk: An analysis of the mediating effect of stock price synchronization

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  • Zhao, Cui-Xia
  • Li, Yan

Abstract

This paper explores the relationship among the investor sentiment index (ISI), stock price synchronization, and crash risk based on data from Chinese A-share listed companies from 2006 to 2023. The study finds a significant negative relationship between the ISI and crash risk, with stock price synchronization acting as a mediating factor between the two. Further analysis reveals that the cash flow ratio significantly moderates the relationship between the ISI and crash risk. Additionally, heterogeneity analysis shows that the impact of the ISI on crash risk differs between firms that hold bank shares and those that do not. Similarly, the effect of the ISI on crash risk varies in firms led by executives with a financial background compared to those without. This research provides a new perspective on understanding crash risk in financial markets and offers theoretical support for related policy-making.

Suggested Citation

  • Zhao, Cui-Xia & Li, Yan, 2026. "The impact of investor sentiment index on stock market crash risk: An analysis of the mediating effect of stock price synchronization," Finance Research Letters, Elsevier, vol. 90(C).
    • Handle: RePEc:eee:finlet:v:90:y:2026:i:c:s1544612325026522
    DOI: 10.1016/j.frl.2025.109403
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