The Dual Effects of Social Media Sentiment on Stock Market Volatility: A Study Based on Sina Weibo Comments

Abstract

This study investigates the impact of social media sentiment on stock market volatility in China by utilizing 191,054 finance-related comments collected from Sina Weibo. Daily sentiment indicators are constructed to empirically examine how investor emotions influence the volatility of the CSI 300 Index. Regression results demonstrate a significant positive relationship between negative sentiment and market volatility, whereas positive sentiment exhibits a stabilizing effect. Further analysis reveals that during periods of high sentiment intensity, the volatility-amplifying effect of negative sentiment becomes more pronounced, indicating the presence of an emotional amplification mechanism. In contrast, during periods of low sentiment intensity, both positive and negative sentiments are associated with lower market volatility, suggesting more rational investor behavior under calmer emotional conditions. This study provides empirical support for behavioral finance theories and highlights the heterogeneous effects of sentiment across different emotional regimes, offering valuable insights for regulators in monitoring and mitigating emotion-driven financial risks.