Embracing market dynamics in the post-COVID era: A data-driven analysis of investor sentiment and behavioral characteristics in stock index futures returns

Jie Gao, Chunguo Fan, Ting Liu, Xiuran Bai, Wenyong Li and Huimin Tan

Omega, 2025, vol. 131, issue C

Abstract: This paper aims to enhance the understanding and prediction of stock market behavior during unexpected events like the COVID-19 pandemic, with a specific focus on the role of market attention, social media sentiment indicators, and the development and evolution of unexpected events. We highlight that the common trading and technical indicators used in forecasting the stock index futures prices often overlook investor sentiment and pandemic-related data, which can be instrumental in predicting stock market behavior during significant emergencies. In response, we propose a multi-faceted approach that incorporates these overlooked factors. First, we enhance the predictive index system by integrating investor sentiment, derived from stock message board commentary, and investor behavior influenced by the development and evolution of the pandemic. This innovative approach refines our model's predictive capabilities and is validated through comparative analysis. Second, we introduce a hybrid framework for predicting stock index futures closing prices. By decomposing the closing price series into long-term trends, cyclical variations, and random fluctuations, we create a more nuanced forecast. Each component is predicted separately using appropriate time-series algorithms, improving the overall predictive accuracy and offering generalizability and scalability. Third, we devise a dynamic trading strategy that recognizes pandemic-related data, evolving over time, as a pivotal factor. This strategy is adaptable to evolving market conditions, and our experimental evidence demonstrates its effectiveness in yielding higher returns and reducing associated risks. Our findings underline the importance of incorporating investor sentiment and pandemic-related data into stock market predictions, thus offering a more comprehensive and accurate approach to market forecasting and risk management.

Keywords: Sentiment analysis; Investor attention; Dynamic trading strategy; Investor behavior (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1016/j.omega.2024.103193

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