This paper generates the investor sentiment index for China A-share stock market, and then uses it to predict future market returns and explains the market abnormal returns caused by firm characteristics and market anomalies. Same with previous works in the U.S. stock market, investor sentiment has a positive correlation with the contemporary aggregate market returns and is also a contrary predictor of future aggregate market returns in China A-share stock market as it drives the current price of stocks extremely far away from the fundamental value. The empirical analyses support the hypothesis that investor sentiment has strong influence with future abnormal returns caused by firm characteristics and market anomalies. Following high investor sentiment, the profits of long-short strategy will be more and the short leg portfolio will mostly gain more at the same time.