The Impact of Investor Sentiment on Stock Returns of Different Industries in China

This paper selects the stock data of different industries in China's stock market. It conducts benchmark and heterogeneity regression analyses using the CICSI investor sentiment index and each sector's weighted average monthly excess returns, with the monthly GDP growth rate as a control variable. The results show that investor sentiment significantly impacts the stock returns in China. The impact on the manufacturing industry, scientific research and technical services, and health and social work is the greatest for different industries. Meanwhile, the impact on public administration, social security, and social organization industries is also much more significant. Based on the results, this paper suggests that in asset pricing and investment decision-making, the impact of investor sentiment should be considered appropriately according to the differences between different industries. At the same time, investors should integrate sentiment analysis into their investment strategies, primarily when investing in sectors highly sensitive to investor sentiment, and diversify their portfolios based on the sensitivity of industries to investor sentiment to manage risk.