This study examines how the Russia-Ukraine conflict affects China’s stock market and whether investor sentiment amplifies the pricing of this geopolitical shock. Using an event-study framework for 2,430 A-share firms and panel regressions with stock-level sentiment extracted from East Money message-board posts, we document three findings. First, the conflict triggers a significant market-wide decline, with higher losses for larger firms and firms with greater overseas revenue exposure. Second, commodity-linked industries, such as energy and non-ferrous metals, generate positive abnormal returns, indicating that the shock creates both losers and temporary winners. Third, the return-sentiment relation strengthens sharply after the outbreak, and the strongest reversals occur in portfolios with the most extreme sentiment, consistent with sentiment-driven overreaction rather than a purely fundamental repricing. The results are robust to alternative sentiment measures, asset-pricing benchmarks, and controls for geopolitical risk and China’s economic policy uncertainty. The study contributes to the literature by providing, to our knowledge, the first firm-level evidence on how the Russia-Ukraine conflict is transmitted into China’s A-share market through social-media-based investor sentiment. More broadly, it demonstrates that in a retail-dominated emerging market, geopolitical shocks can generate both market-wide losses and temporary sectoral overpricing, with investor sentiment serving as a crucial amplification mechanism. The findings provide a framework for future research on how war shocks are incorporated into stock prices through real exposure and behavioral amplification.
Cheng et al. (Mon,) studied this question.