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Measurement of Individual Investor Sentiment and Its Application: Evidence from Chinese Stock Message Board

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  • Chuangxia Huang
  • Shigang Wen
  • Xin Yang
  • Jinde Cao
  • Xiaoguang Yang

Abstract

This paper investigates individual investor sentiment in Chinese stock message board Guba Eastmoney and its relation to the market returns and volatility. Focusing on measuring the sentiment, we propose a novel algorithm Semantic Orientation from Laplace Smoothed Normalized Pointwise Mutual Information(SO-LNPMI). We show that: (i) comparing to traditional methods, SO-LNPMI has higher accuracy and better adaptive property of probability estimate; (ii) negative sentiment is negatively correlated with market returns, whereas positive sentiment does not have any statistically significant impact on market returns; (iii) positive(negative) sentiment is negatively(positively) correlated with market volatility. Our results survive a range of robustness tests.

Suggested Citation

  • Chuangxia Huang & Shigang Wen & Xin Yang & Jinde Cao & Xiaoguang Yang, 2022. "Measurement of Individual Investor Sentiment and Its Application: Evidence from Chinese Stock Message Board," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 58(3), pages 681-691, February.
    • Handle: RePEc:mes:emfitr:v:58:y:2022:i:3:p:681-691
    DOI: 10.1080/1540496X.2020.1835637
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    Cited by:

    1. Zhifeng Liu & Kaixin Li & Tingting Zhang, 2023. "Information diversity and household portfolio diversification," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(4), pages 3833-3845, October.
    2. Zeng, Qing & Cao, Jiawei & Guo, Yangli & Dong, Dayong, 2023. "The macroeconomic attention index: Evidence from China," Finance Research Letters, Elsevier, vol. 52(C).

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