Chinese stock anomalies and investor sentiment

This paper studies 62 cross-sectional anomalies in the Chinese market and the effects of sentiment on them. We find that the anomalies in the trading frictions category are the most pronounced. Unlike the anomaly returns in the U.S. market, the anomaly returns have no publication effect. Rather, they increase over time with the trend of investor sentiment. The high proportion of retail investors makes investor sentiment play an important role in the Chinese market. Investor sentiment drives the wave of anomaly returns, and anomaly returns are higher during periods of higher sentiment. Investor sentiment has predictive power on anomaly returns. •The high proportion of retail investors makes investor sentiment play an important role in the Chinese market.•The anomalies in the trading frictions category are the most pronounced in the Chinese market.•The anomaly returns in the Chinese market increase over time with the trend of investor sentiment.•Investor sentiment drives the wave of anomaly returns, and anomaly returns are higher during periods of higher sentiment.