Internet sentiment exacerbates intraday overtrading, evidence from A-Share market

ArXiv ID: 2404.12001 “View on arXiv”

Authors: Unknown

Abstract

Market fluctuations caused by overtrading are important components of systemic market risk. This study examines the effect of investor sentiment on intraday overtrading activities in the Chinese A-share market. Employing high-frequency sentiment indices inferred from social media posts on the Eastmoney forum Guba, the research focuses on constituents of the CSI 300 and CSI 500 indices over a period from 01/01/2018, to 12/30/2022. The empirical analysis indicates that investor sentiment exerts a significantly positive impact on intraday overtrading, with the influence being more pronounced among institutional investors relative to individual traders. Moreover, sentiment-driven overtrading is found to be more prevalent during bull markets as opposed to bear markets. Additionally, the effect of sentiment on overtrading is observed to be more pronounced among individual investors in large-cap stocks compared to small- and mid-cap stocks.

Keywords: Investor Sentiment, High-Frequency Data, Market Microstructure, Overtrading, Systemic Risk, Equities

Complexity vs Empirical Score

• Math Complexity: 3.0/10
• Empirical Rigor: 8.5/10
• Quadrant: Street Traders
• Why: The paper employs high-frequency data analysis and text mining for sentiment indices, demonstrating strong data/implementation focus, while the mathematics involved is standard econometric methods rather than dense advanced theory.

  flowchart TD
    A["Research Goal:<br>Effect of Investor Sentiment<br>on Intraday Overtrading"] --> B["Data Collection<br>High-Frequency Data: CSI 300 & 500<br>Eastmoney Guba Forum<br>01/2018 - 12/2022"]
    B --> C["Methodology<br>Empirical Analysis & Regression<br>Trading Volume vs Sentiment Indices"]
    C --> D["Key Findings"]
    
    subgraph D ["Key Findings"]
        F1["Sentiment significantly increases<br>intraday overtrading"]
        F2["Effect is stronger for<br>Institutional Investors vs Individuals"]
        F3["Effect is more pronounced<br>during Bull Markets"]
        F4["Effect is stronger for Individuals<br>in Large-Cap Stocks"]
    end