A Correlation Study Between Online Public Mood And Chinese Stock Market

Human irrational animal spirit is suggested to be the main reason for economic fluctuations, while emotion plays a prominent role in people’s irrational behavior. Based on the theoretical model of emotion and financial decision-making, this study distinguished the current studies into two main categories:investor’s emotion indicators and social mood indicators. Exploring the relationship between emotion and stock market from the view of social mood, especially based on the Internet platform, has been attracting more and more researcher’s attention these years. Enlightened by Psychoinformatics, we introduced the field of Behavioral Financial Informatics where we explore the behavioral financial issues by means of Information Science and Technology, which can help acquiring and organizing the big data from Internet.Based on the perspective of Behavioral Financial Informatics, this study constructed an emotion index by Weibo data, with which to explore whether there is a correlation between online public mood and Chinese stock market. Firstly, we collected the Weibo data by Computer and Information Science&Technology, and obtained the Weibo sample database for this study. Secondly, we got the time series of Weibo emotion words from July2011to December2011according to the Weibo emotion words list created by ourselves. Lastly, we built a Weibo Emotion Index based on the time series analysis of the Weibo emotion words, and used this index to explore the relationship between Weibo emotion and Chinese stock market.Results indicated that:(1)The correlations between Weibo emotion words series and Shanghai Composite Index shows big differences, but the Weibo Emotion Index built on the Weibo emotion words has a high correlation with Shanghai Composite Index Price.(2)The Weibo Emotion Index moving averaged by5days shows a higher and more robust correlation with Shanghai Composite Index.(3)The5-day Weibo Emotion Moving Average Index and the next trading day’s Shanghai Composite Index price are co-integrated. The short-term fluctuations of Shanghai Composite Index price no longer subjected to the impact of the5-day Weibo Emotion Moving Average Index’s fluctuations, but are influenced by a reverse force from an Error Correction Model term, which will pull the Shanghai Composite Index deviated from the long-term equilibrium back to the equilibrium position.We verified the conclusions above with a sample from December2011to March2012. The result revealed that the Weibo Emotion Index built by the same way to the former sample proved the relationship with Shanghai Composite Index as well. What’s more, the correlation between Weibo Emotion Index and Shanghai Composite Index, especially the model good fit of related econometric model in the second sample are improved compared to the first sample. This may indicates that with the development and maturation of Weibo, the relationship between weibo emotion and Shanghai Composite Index is increasingly close. In conclusion, Online public mood from Chinese Weibo platform can be a significant indicator for predicting the Shanghai Composite Index price of next trading day. The present study is just a localization try in the background of Chinese social networking culture, and encountered many difficulties and challenges on technology and other sides, which deserves for further supplement and improvement in the future.