Text extracted individual investor sentiment, correlated trading and return comovement

Speaker：BU Hui（Associate Professor, Beijing University of Aeronautics and Astronautics）

Host：ZENG Yan, Professor, Lingnan College

Time and Date：14:30-16:30, Nov. 5, 2021

https://meeting.tencent.com/dm/2DC4F1teLqIU

Meeting ID：791 429 295

Abstract:

This paper designs a new and direct empirical analysis to explore one hypothesis of sentiment-based theory of comovement, that is some investors trade groups of stocks with similar expectations and correlated trading-induced return comovement. Investor sentiment extracted directly from online messages combined with high-frequency trading and mutual funds holding positions data allow us to examine trading behavior of different types of investors at individual stock level. Using the study sample of component stocks in the CSI 300 index in the Chinese stock market from Sept. 1, 2009 to June 30, 2016, our study provide direct evidence for the existence of return comovement related to investor sentiment, and sentiment induced correlated trading, which lead to return comovement. Moreover, our study uncovers not only small trades, a commonly used proxy for retail investors, but also medium trades are affected by investor sentiment but in different ways. Most surprisingly, mutual funds are also affected by individual investors’ sentiment, implying another channel of sentiment induced trading.