Comparative Research on the Relationship between Investor Sentiment and Stock Price during COVID-19 Pandemic and Russian-Ukrainian War

Abstract

The current world is significantly influenced by the Russia-Ukraine war and the Covid-19 epidemic. This paper explores the relationship between investor sentiment and stock price during the Russian-Ukrainian war and the COVID-19 pandemic, which is currently a research hotspot in the academic field. First, we choose the data of Shanghai and Shenzhen 300 index and use the principal component analysis (PCA) methodology to determine the investor sentiment index; Second, this paper uses the commonly time series model, i.e., VAR model to conduct the empirical research to make a comprehensively investigation regarding the lead-lag relationship between investor sentiment and related stock returns. The research results show that the stock price has a significant positive effect on investor sentiment in these two periods. The rise of stock price will make investor sentiment rise in several time period lags. However, investor sentiment’s impact on stock price is insignificant, which is contrary with the previous case. Compared with the Russian Ukrainian war period, the estimation of the epidemic period has a larger impact on investor sentiment, and the long-term impact is more significant. The results in this paper may benefit certain investors in the financial management.