The impact of social cohesion on stock market resilience: Evidence from COVID-19
Badar Nadeem Ashraf and
John W. Goodell
Journal of Behavioral and Experimental Finance, 2022, vol. 36, issue C
We investigate whether cultural tightness, the strength of social norms, provides stock markets with resilience to external shocks. There is tension in forming expectations regarding this. One reasoning, particularly following from cultural archaeology literature, is that societies best cope with challenges, disaster recovery, and loss when they are culturally comfortable with transformation, with cultural tightness arguably opposed to cultural change. On the other hand, alternative reasoning is that tightness allows for societal cohesion that supports optimism to function in a unified way to confront challenge. We test whether markets were supported by cultural tightness during COVID-19 adversity. In accordance with the latter view, we evidence that stock market volatilities during COVID-19 were significantly lower in countries with ‘tighter’ cultures.
Keywords: Stock market volatility; Economic shock; Social cohesion; COVID-19; National culture; Tightness (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:beexfi:v:36:y:2022:i:c:s2214635022000715
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