The Influence of Investor Attention and Sentiment on the Stock Markets of Russia and China

Stock markets nowadays are rapidly changing. Investment is becoming available for more people with each year and the rise of the Internet allows to get any information to make investment decisions. Information is one of the most important resources that have an impact on investors’ decisions. However, nowadays there is a lot of open data that the agent cannot track and process it completely. Professional investors have more time and resources to monitor a wider range of stock, to conduct a proper market analysis, to calculate the fair value of a stock and finally make a more rational decision. On the contrary, private investors are usually more superficial. In this regard, there is a necessity to explore the influence of sentiment on the stock markets. This study will examine the influence of investor attention on the stock markets of the emerging markets of Russia and China. To analyze the sentiment effects on Russian and Chinese markets, it is supposed to create two sentiment indices, to construct the portfolios of three clusters (high, neutral and low sentiment), to analyze the market sentiment effect on the stock returns. The portfolio weight is realized via two approaches, the volume of Google searches and daily news analysis. This study shows the existing of the sentiment effect in Russia and China, while the Chinese stock market can be noted as more homogeneous and stable due to the effective government control via Chinese authorities. The weighted portfolios made it possible to get the high returns comparing the average market returns. Hence, the portfolio based on the analysis of investor sentiment is becoming more effective investment strategy.