Study of the Impact between Investor Sentiment and Return-Volatility: Evidence from Chinese Commodity Futures Market

Abstract

There is no consensus on the relationship between investor sentiment and return-volatility in different financial markets. This study uses a machine learning approach to construct investor sentiment in Chinese commodity futures market, exploring the relationship of return-volatility and moderating effect of investor sentiment. We find that in Chinese commodity futures market, there is a negative correlation of return-volatility. Further analysis shows that under positive (negative) investor sentiment, the relationship of return-volatility is positive (negative). But regardless of the sentimental state, sentiment has a positive moderating effect, and different commodities have heterogeneity.

Keywords: Investor Sentiment; Return-Volatility; Commodity Futures Market

DOI: 10.7176/EJBM/17-3-07

Publication date: April 30^th 2025