The Impact of Social Media Sentiment on Chinese Stock Market
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Using the newest data from a leading Chinese social media investing platform, I test the impact of the individual and institutional investor sentiment on stock market using VAR models. Although my results show that the investor sentiment can influence stock market, their impact is different: individual investor’s sentiment is helpful in predicting the stock return while institutional investor’s sentiment is helpful in predicting the trading volume. In addition, I find that the firm size can influence the impact of investor sentiment: for larger firms, the impact of sentiment is more obvious. My study suggests that it is meaningful to split the individual and institutional investor sentiment, and it is necessary to choose a balanced stock portfolio while studying the impact of investor sentiment.