Investor sentiment has its characteristics of the inherent complexity and changing. In this paper, through the analysis of the "investor sentiment and cross-sectional data on the impact of stock returns"[1] published by Baker and others in 2006, combining with the specific situation of China''s securities market, and basing on the BW model to select Shanghai and Shenzhen 300 index turnover rate and other 5 emotional indices, and using the principal component analysis to build a monthly investor sentiment index of China''s securities market. The principal component analysis of residual that calculated by a regression of emotional indicators and macroeconomic data is carried out, to get macroscopical emotional indicators that removes macro factors. Finally, OLS regression analysis is carried out with the Shanghai Composite Index and Shenzhen Component Index to find that the constructed emotional index has a significant effect on the yield of China''s stock market, thus verifying the validity of the emotional index.
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