This study examines the influence of investor sentiment on stock investment returns in China's rapidly developing yet volatile securities market. Utilizing principal component analysis, a comprehensive investor sentiment index is constructed from six key indicators. The dynamic relationship between investor sentiment and stock market return volatility is explored through a Vector Autoregression (VAR) model and Generalized Autoregressive Conditional Heteroskedasticity (GARCH) models. The findings reveal a significant bidirectional correlation, with positive optimism exerting a greater impact on stock returns than negative pessimism. The findings of this study indicate that investor sentiment exhibits a heightened sensitivity to declining returns as opposed to rising ones, offering valuable insights for both investors and policymakers.