Chinese institutional investors' sentiment

Gerhard Kling, Lei Gao

Research output: Contribution to journalArticlepeer-review

104 Citations (Scopus)


We use daily survey data on Chinese institutional investors’ forecasts to measure investors’ sentiment. Our empirical model uncovers that share prices and investor sentiment do not have a long-run relation; however, in the short-run, the mood of investors follows a positive-feedback process. Hence, institutional investors are optimistic when previous market returns were positive. Contrarily, negative returns trigger a decline in sentiment, which reacts more sensitively to negative than positive returns. Investor sentiment does not predict future market movements—but a drop in confidence increases market volatility and destabilizes exchanges. EGARCH models reveal asymmetric responses in the volatility of investor sentiment; however, Granger causality tests reject volatility-spillovers between returns and sentiment.
Original languageEnglish
Pages (from-to)374-387
Number of pages14
JournalJournal of International Financial Markets, Institutions and Money
Issue number4
Early online date10 Apr 2007
Publication statusPublished - Oct 2008


  • Shanghai Stock Exchange
  • Institutional investor
  • Investors' sentiment


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