Core Viewpoint - The effectiveness of news sentiment factors in stock selection is significantly influenced by the trading activity of individual investors, particularly with the rise of new media platforms that enhance information dissemination and consensus formation among investors [4][12][17]. Group 1: News Sentiment and Stock Selection - In a liquidity-driven market, news sentiment factors tend to perform well, with macro and industry factors showing significant stock selection ability in large-cap stocks like the CSI 300, while micro news performs better in small-cap stocks [2][5]. - The annualized excess return of macro event factors in the CSI 300 reached 16.9% over the past year, indicating strong performance [5][28]. - The study suggests that news data should not be treated uniformly; macro and industry news are more applicable to large-cap stocks, while announcements and equity events should be adjusted for market expectations in small-cap stocks [6][22]. Group 2: Impact of Individual Investor Activity - Since September 2024, the trading activity of individual investors has been on the rise, correlating with an increase in new account openings, which enhances the efficiency of information transmission among these investors [4][11][12]. - The rise of new media platforms like Douyin and Xiaohongshu has transformed how individual investors access and disseminate information, leading to quicker consensus formation and improved pricing power in the market [12][14][15]. - The increase in individual investor participation is believed to be a key factor driving the effectiveness of news sentiment factors in stock selection [12][17]. Group 3: Differentiation of News Types - Different types of news have varying impacts on stocks based on their market capitalization; macro and industry news tend to have a momentum effect on large-cap stocks, while small-cap stocks may experience a reversal effect due to market expectations [22][25]. - The study categorizes news into seven types: macro, industry, trading, operational, equity, announcements, and others, highlighting the need for tailored approaches in stock selection based on news type and stock style [19][21]. - In the CSI 1000 small-cap stock pool, the highest excess return from equity and trading events was only 5%, indicating weaker performance compared to large-cap stocks [28][32].