Research On The Construction Of Investor Sentiment Index And Its Differential Impact On Momentum Effec

With the emergence of many "anomalies" in the financial market,such as the mystery of stock premium,the traditional financial theory has been questioned by the academic community.Momentum effect,as one of the common "anomalies" in financial market,has become a hot topic in academic circles.Among them,investor sentiment,as an important branch of behavioral finance theory,brings subjective factors such as irrational trading behavior of investors into the research scope of financial theory,and becomes one of the main research objects for many scholars to discuss the cause of momentum effect.In China,irrational investment trading behaviors dominated by retail investors are more likely to lead to frequent fluctuations in stock prices and financial market shocks.Therefore,it is of great practical significance to explore the influence of investor sentiment on investors’ momentum effect trading strategies in China’s stock market.Based on existing literature,combined with subjective and objective sentiment source indicators,this paper adopts partial least squares regression(PLS)method to construct A comprehensive index of investor sentiment that can comprehensively reflect market sentiment fluctuations,and discusses the influence mechanism of investor sentiment on momentum effect in China’s A-share market.Specifically,In this paper,text mining and other techniques are used to analyze the text data of Shanghai Stock Exchange 50 bar,and the sentiment index of Shanghai Stock Exchange50 bar is constructed.Secondly,combined with baidu keyword search data statistics,the construction of Baidu search index;Finally,combined with four traditional market sentiment proxy indicators,using PLS method to construct a composite index of investor sentiment.In order to ensure the consistency of sample ranges of research objects,this paper analyzes the transaction data of listed companies in Shanghai and Shenzhen A-share markets from January 10,2015 to December 31,2021,and examines the differences between the traditional return momentum strategy and the risk-adjusted residual momentum strategy in China’s A-share market.Finally,the influence mechanism of investor sentiment on momentum effect is discussed.The results show that there are significant short-term momentum effect and long-term reversal effect in China’s A-share market.The return rate of traditional return momentum is better than that of residual momentum.Investor sentiment has a significant impact on the momentum effect in China’s stock market.Compared with the low mood period,the momentum gain in the high mood period is higher,and the momentum gain mainly comes from the high mood period.After robustness test,the conclusion above is still valid,that is,investor sentiment has A significant impact on the momentum effect of China’s A-share market.