Forecasting stock index futures returns with mixed-frequency sentiment

Using the data in Chinese financial market, mixed-frequency stock index futures sentiment and mixed-frequency stock index sentiment are constructed according to MIDAS model. We test whether mixed-frequency stock index futures sentiment and mixed-frequency stock index sentiment have predictive power on stock index futures returns. The empirical results show that mixed-frequency stock index futures sentiment factors have more predictive power than mixed-frequency stock index sentiment factors and Fama-French three factors. In out-sample forecast, we show that sentiment trading strategy provides a more positive returns than time series momentum trading strategy and passive long positions.