Climatic change and epidemic disease could influence the investor sentiment. Under such circumstances, how to invest the stock market in different stock market states (bull, bear or neutral) is an important topic for investors. To capture the investor sentiment more precisely, we use principal component analysis to analyze some investor sentiment indicators, and then form a composite index of investor sentiment. These investor sentiment indicators include the turnover rate, the percent change in margin borrowing, the percent change in short interest, net buy/sell, the turnover ratio of major institutional investors, psychological line, and advance decline ratio. | Does the investor sentiment affect the stock returns in Taiwan’s stock market under different market states
