Modern finance theory suggests investor sentiment should not be priced as the mispricing induced by sentiment can be removed by trades of rational investors and arbitraging. However, research in recent decades illustrates that if investor sentiment induces uninformed demand shock, and the cost of arbitrage is high, the influence of investor sentiment cannot be ignored. This research continues the investigation of the role of investor sentiment in the asset pricing mechanism by focusing on two exchanges in China. By using multiple factors to construct a sentiment index, this study provides some evidence to show that if the sentiment at the beginning of a period is low, large stocks (growth stocks) tend to have relatively lower return than small stocks (value stocks), and vice versa. By splitting the entire period into bull and bear periods, the regression outcomes suggest that the impact of investor sentiment in the bear periods is much more influential than in bull periods. Furthermore, this study suggests investors in the Chinese markets exhibit a significant learning effect. As the regression analysis show that the influence of the sentiment index is rarely significant since 2006, it implies that investor sentiment may not be one of the major risk factors that should be accounted for in recent.