Which is more important in stock market forecasting: Attention or sentiment?

Abstract

We examine the predictability of investors' attention and sentiment on four major stock indexes' returns in China between 2008 and 2018. We create investors' attention and sentiment variables by using the investors' posts from Guba, which is the largest stock forum in China. We find that both investor attention and sentiment can improve the stock return predictability with in-sample and out-of-sample periods. However, investor sentiment is more informative than investor attention in stock return prediction. These results remain significant by testing posts announced in trading and non-trading sessions. Our paper provides new empirical evidence for stock return forecasting in a data-rich environment.