COVID-19 pandemic sentiment and stock market behavior: evidence from an emerging market

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Byomakesh Debata ◽  
Kshitish Ghate ◽  
Jayashree Renganathan
Keyword(s):  
Stock Market ◽  
Emerging Market ◽  
Sample Period ◽  
Market Behavior ◽  
Market Returns ◽  
Full Sample ◽  
Content Type ◽  
Time Frequency ◽  
Search Volume ◽  
Google Search

PurposeThis study aims to examine the relationship between pandemic sentiment (PS) and stock market returns in an emerging order-driven stock market like India.Design/methodology/approachThis study uses nonlinear causality and wavelet coherence techniques to analyze the sentiment-returns nexus. The analysis is conducted on the full sample period from January to December 2020 and further extended to two subperiods from January to June and July to December to investigate whether the associations between sentiment and market returns persist even several months after the outbreak.FindingsThis study constructs two novel measures of PS: one using Google Search Volume Intensity and the other using Textual Analysis of newspaper headlines. The empirical findings suggest a high degree of interrelationship between PS and stock returns in all time-frequency domains across the full sample period. This interrelationship is found to be further heightened during the initial months of the crisis but reduces significantly during the later months. This could be because a considerable amount of uncertainty regarding the crisis is already accounted for and priced into the markets in the initial months.Originality/valueThe ongoing coronavirus pandemic has resulted in sharp volatility and frequent crashes in the global equity indices. This study is an endeavor to shed light on the ongoing debate on the COVID-19 pandemic, investors’ sentiment and stock market behavior.

scholarly journals COVID-19 fear index: does it matter for stock market returns?

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Sowmya Subramaniam ◽  
Madhumita Chakraborty
Keyword(s):  
Stock Market ◽  
Volume Index ◽  
Market Returns ◽  
Stock Market Returns ◽  
Content Type ◽  
Significant Period ◽  
Search Terms ◽  
Search Volume ◽  
Fear Index ◽  
Google Search

PurposeThe purpose of this paper is to capture the investors' mood related to the COVID-19 pandemic and analyze its impact on the stock market returns.Design/methodology/approachTo capture the investor mood related to the COVID-19 pandemic, the authors construct a unique COVID-19 fear index based on the Search Volume Index (SVI) from Google Trends (http://www.Google.com/trends/) of the search terms related to COVID-19 words and phrases as revealed by Google and Internet dictionaries. The COVID-19 fear index was used to investigate its impact on the stock market returns.FindingsThe study finds a strong negative association between COVID-19 fear and stock returns. Unlike other studies, the relationship is persistent for a significant period. This relationship is not found to reverse in the following days. The results also highlight that COVID-19 fear strongly impacts the stock market. The sentiment persists for a significant period and is not reversed soon, unlike the regular times in earlier studies.Originality/valueThe study is among the very few studies that constructed COVID-19 fear index using several Google search terms and captured its impact on the stock market returns.

Investor attention using the Google search volume index – impact on stock returns

2019 ◽  
Vol 11 (1) ◽  
pp. 55-69 ◽  
Author(s):  
Vighneswara Swamy ◽  
Munusamy Dharani
Keyword(s):  
Stock Market ◽  
Stock Returns ◽  
Volume Index ◽  
Trading Behavior ◽  
Excess Returns ◽  
Investor Attention ◽  
Content Type ◽  
Search Volume ◽  
Indian Stock Market ◽  
Google Search

Purpose The purpose of this paper is to investigate whether the investor attention using the Google search volume index (GSVI) can be used to forecast stock returns. The authors also find the answer to whether the “price pressure hypothesis” would hold true for the Indian stock market. Design/methodology/approach The authors employ a more recent fully balanced panel data for the period from July 2012 to Jun 2017 (260 weeks) of observations for companies of NIFTY 50 of the National Stock Exchange in the Indian stock market. The authors are motivated by Tetlock (2007) and Bijl et al. (2016) to employ regression approach of econometric estimation. Findings The authors find that high Google search volumes lead to positive returns. More precisely, the high Google search volumes predict positive and significant returns in the subsequent fourth and fifth weeks. The GSVI performs as an useful predictor of the direction as well as the magnitude of the excess returns. The higher quantiles of the GSVI have corresponding higher excess returns. The authors notice that the domestic investor searches are correlated with higher excess returns than the worldwide investor searches. The findings imply that the signals from the search volume data could be of help in the construction of profitable trading strategies. Originality/value To the best of the authors knowledge, no paper has examined the relationship between Google search intensity and stock-trading behavior in the Indian stock market. The authors use a more recent data for the period from 2012 to 2017 to investigate whether search query data on company names can be used to predict weekly stock returns for individual firms. This study complements the prior studies by investigating the relationship between search intensity and stock-trading behavior in the Indian stock market.

scholarly journals Investor attention and the response of US stock market sectors to the COVID-19 crisis

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Lee A. Smales
Keyword(s):  
Stock Market ◽  
Stock Returns ◽  
Information Discovery ◽  
Investor Attention ◽  
Content Type ◽  
Search Volume ◽  
Global Stock Markets ◽  
Google Search ◽  
The Relationship ◽  
Global Stock

PurposeCOVID-19 has had an immense impact on global stock markets, with no sector escaping its effects. Investor attention towards COVID-19 surged as the virus spread, the number of cases grew and its consequences imposed on everyday life. We assess whether this increase in investor attention may explain stock returns across different sectors during this unusual period.Design/methodology/approachWe adopt the methodology of Da et al. (2015), using Google search volume (GSV) as a proxy for investor attention to examine the relationship between investor attention and stock returns across 11 sectors.FindingsOur results demonstrate that heightened attention towards COVID-19 negatively influences US stock returns. However, relatively speaking, some sectors appear to have gained from the increased attention. This outperformance is centred in the sectors most likely to benefit (or likely to lose least) from the crisis and associated spending by households and government (i.e. consumer staples, healthcare and IT). Such results may be explained by an information discovery hypothesis in the sense that investors are searching online for information to enable a greater understanding of COVID-19's impact on relative stock sector performance.Originality/valueWhile we do not claim that investor attention is the only driver of stock returns during this unique period, we do provide evidence that it contributes to the market impact and to the heterogeneity of returns across stock market sectors.

scholarly journals Are Investors’ Attention and Uncertainty Aversion the Risk Factors for Stock Markets? International Evidence from the COVID-19 Crisis

Risks ◽  
2020 ◽  
Vol 9 (1) ◽  
pp. 2
Author(s):  
Falik Shear ◽  
Badar Nadeem Ashraf ◽  
Mohsin Sadaqat
Keyword(s):  
Stock Market ◽  
Cultural Values ◽  
National Culture ◽  
Negative Impact ◽  
Uncertainty Avoidance ◽  
Market Returns ◽  
Stock Market Returns ◽  
Search Volume ◽  
Google Search ◽  
The Impact

In this paper, we examine the impact of investors’ attention to COVID-19 on stock market returns and the moderating effect of national culture on this relationship. Using daily data from 34 countries over the period 23 January to 12 June 2020, and measuring investors’ attention with the Google search volume (GSV) of the word “coronavirus” for each country, we find that investors’ enhanced attention to the COVID-19 pandemic results in negative stock market returns. Further, measuring the national culture with the uncertainty avoidance index (the aspect of national culture which measures the cross-country differences in decision-making under stress and ambiguity), we find that the negative impact of investors’ attention on stock market returns is stronger in countries where investors possess higher uncertainty avoidance cultural values. Our findings imply that uncertainty avoidance cultural values of investors promote financial market instability amid the crisis.

scholarly journals Dynamic Return-Volume Relations in the Saudi Stock Market: Evidence from Quantiles Regressions

2015 ◽  
Vol 7 (11) ◽  
pp. 84
Author(s):  
Othman Alwagdani
Keyword(s):  
Stock Market ◽  
Trading Volume ◽  
Explanatory Power ◽  
Dependence Structure ◽  
Sample Period ◽  
Market Returns ◽  
Full Sample ◽  
Post Market ◽  
The Mean ◽  
Returns Forecasting

This paper examines the causality patterns between the lagged trading volume and returns of the Saudi stock market (TASI) for the period from2003:01 to April 2013:05, along with two consecutive sub-periods to account for pre- and post- market collapse of 2006. Using the quantile regression approach, the study finds that the return-volume relations are heterogeneous across quantiles with symmetric tendency across the mean for the full sample period. On the contrary, the study could not support the heterogeneous and symmetric effects for the first sub-sample period. The second sub-sample period is characterized by homogenous across quantiles with statistical evidence of symmetry. Thus, the study concludes that the dependence structure between the lagged volume and subsequent market returns seems to be randomly relying on the chosen period which makes volume unsuitable to be used as explanatory power for returns forecasting.

scholarly journals Stock market activity and Google Trends: the case of a developing economy

2019 ◽  
Vol 21 (2) ◽  
pp. 191-212
Author(s):  
Vinh Xuan Bui ◽  
Hang Thu Nguyen
Keyword(s):  
Stock Market ◽  
Trading Volume ◽  
Design Methodology ◽  
Investor Attention ◽  
Content Type ◽  
Market Activity ◽  
Search Terms ◽  
Search Volume ◽  
Stock Indices ◽  
Google Search

Purpose The purpose of this paper is to investigate the impacts of investor attention on stock market activity. Design/methodology/approach The authors employed the Google Search Volume (GSV) Index, a direct and non-traditional proxy for investor attention. Findings The results indicate a strong correlation between GSV and trading volume – a traditional measure of attention – proving the new measure’s reliability. In addition, market-wide attention increases both stock illiquidity and volatility, whereas company-level attention shows mixed results, driving illiquidity and volatility in both directions. Originality/value To the best of the authors’ knowledge, Nguyen and Pham’s (2018) study has been the only previous study identifying investor attention in Vietnam by using GSV as a proxy and examining the impacts of broad search terms about the macroeconomy on the stock market as a whole – on stock indices’ movements. The paper will contribute to this by quantifying GSV impacts on each stock individually.

scholarly journals Measurement of Investor Sentiment and Its Bi-Directional Contemporaneous and Lead–Lag Relationship with Returns: Evidence from Pakistan

2018 ◽  
Vol 11 (1) ◽  
pp. 94 ◽  
Author(s):  
Mehwish Khan ◽  
Eatzaz Ahmad
Keyword(s):  
Emerging Market ◽  
Investor Sentiment ◽  
Volume Index ◽  
Sufficient Evidence ◽  
Market Returns ◽  
Search Volume ◽  
Irrational Behavior ◽  
Thin Market ◽  
Google Search

The present study examines bi-directional contemporaneous and lead–lag relationships between investor sentiment and market returns in the emerging market of Pakistan over the period of 2006 to 2016. To measure investor sentiment, the study employs a direct proxy namely Google search volume index (GSVI) and nine other indirect proxies. Besides conventional regression and VAR model, the study applies Geweke’s (1982) tests to investigate the nature of relationships between sentiment and returns. Thus, the study adds to existing literature by providing latest and thorough statistical evidence on the role of investor sentiment in influencing market returns. The study finds sufficient evidence regarding irrational behavior of investors in the thin market of Pakistan. In particular, the results indicate substantive role of sentiment in dragging stock market away from its sustainable path as implied by economic fundamentals.

A quantile regression approach to evaluate the relative impact of global and local factors on the MENA stock markets

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Slah Bahloul ◽  
Nawel Ben Amor
Keyword(s):  
Stock Market ◽  
Quantile Regression ◽  
Stock Returns ◽  
Stock Markets ◽  
Financial Integration ◽  
Ordinary Least Squares ◽  
Market Returns ◽  
Stock Market Returns ◽  
Content Type ◽  
The Impact

PurposeThis paper investigates the relative importance of local macroeconomic and global factors in the explanation of twelve MENA (Middle East and North Africa) stock market returns across the different quantiles in order to determine their degree of international financial integration.Design/methodology/approachThe authors use both ordinary least squares and quantile regressions from January 2007 to January 2018. Quantile regression permits to know how the effects of explanatory variables vary across the different states of the market.FindingsThe results of this paper indicate that the impact of local macroeconomic and global factors differs across the quantiles and markets. Generally, there are wide ranges in degree of international integration and most of MENA stock markets appear to be weakly integrated. This reveals that the portfolio diversification within the stock markets in this region is still beneficial.Originality/valueThis paper is original for two reasons. First, it emphasizes, over a fairly long period, the impact of a large number of macroeconomic and global variables on the MENA stock market returns. Second, it examines if the relative effects of these factors on MENA stock returns vary or not across the market states and MENA countries.

Weather, investor psychology and stock returns: evidence from Fiji's stock market

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Janesh Sami
Keyword(s):  
Stock Market ◽  
Stock Returns ◽  
Sunshine Duration ◽  
Market Returns ◽  
Modeling Framework ◽  
Stock Market Returns ◽  
Content Type ◽  
Asset Pricing Models ◽  
Weather Changes ◽  
Practical Implications

PurposeThis paper investigates whether weather affects stock market returns in Fiji's stock market.Design/methodology/approachThe author employed an exponential general autoregressive conditional heteroskedastic (EGARCH) modeling framework to examine the effect of weather changes on stock market returns over the sample period 9/02/2000–31/12/2020.FindingsThe results show that weather (temperature, rain, humidity and sunshine duration) have robust but heterogenous effects on stock market returns in Fiji.Research limitations/implicationsIt is useful for scholars to modify asset pricing models to include weather-related variables (temperature, rain, humidity and sunshine duration) to better understand Fiji's stock market dynamics (even though they are often viewed as economically neutral variables).Practical implicationsInvestors and traders should consider their mood while making stock market decisions to lessen mood-induced errors.Originality/valueThis is the first attempt to examine the effect of weather (temperature, rain, humidity and sunshine duration) on stock market returns in Fiji's stock market.

Investor sentiment antecedents

2019 ◽  
Vol 11 (1) ◽  
pp. 36-54 ◽  
Author(s):  
Ranjan Dasgupta ◽  
Rashmi Singh
Keyword(s):  
Decision Making ◽  
Stock Market ◽  
Emerging Market ◽  
Investment Decision ◽  
Investor Sentiment ◽  
Equation Modeling ◽  
Content Type ◽  
Investment Decision Making ◽  
Retail Investors ◽  
Specific Factors

PurposeThe determinants of investor sentiment based on stock market proxies are found in numbers in empirical studies. However, investor sentiment antecedents developed from primary survey measures by constructing an investor sentiment index (ISI) are not done till date. The purpose of this paper is to fill this research gap by first developing an ISI for the Indian retail investors and then examining the investor-specific, stock market-specific, macroeconomic and policy-specific factors’ individual impact on the investor sentiment.Design/methodology/approachFirst, the authors develop the ISI by using the mean scores of six statements as formulated based on popular direct investor sentiment surveys undertaken throughout the world. Then, the authors employ the structural equation modeling approach on the responses of 576 respondents on 40 statements (representing the index and four study hypotheses) collected in 2016 across the country.FindingsThe results show that investor- and stock market-specific factors are the major antecedents of investor sentiment for these investors. However, interestingly macroeconomic fundamentals and policy-specific factors have no role to play in driving their sentiment to invest in the stock market.Practical implicationsThe major implication of the results is that the Indian retail investors are showing a mixed approach of Bayesian and behavioral finance decision making. So, these implications can guide the investment consultants, regulators, other stakeholders in markets and overwhelmingly the retail investors to introspect their investment decision making across time horizons.Originality/valueThe formulation of ISI in an emerging market context and thereafter examining possible antecedents to influence retail investors in their investment decision making are not done till date. So, the study is unique in its research issue and findings and will have significant implication for the retail investors at least in emerging market contexts.

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