Pandemic-driven financial contagion and investor behavior: Evidence from the COVID-19

Ying Yuan, Haiying Wang and Xiu Jin

International Review of Financial Analysis, 2022, vol. 83, issue C

Abstract: This paper studies the pandemic-driven financial contagion during the COVID-19 period and the impact of investor behavior on it by constructing three types of direct behavior measurements based on Google search volumes. More specifically, using a sample of 26 major stock markets around the world during the COVID-19 pandemic, we construct a non-linear financial contagion network via a dynamic mixture copula-EVT (extreme value theory) model to quantitatively detect and measure the complex nature of pandemic-driven financial contagion. Furthermore, through constructing direct investor behavior measurements including investor attention, sentiment, and fear, we find investor behavior plays an important role in explaining pandemic-driven financial contagion. We also find that the impacts of investor behavior on the pandemic-driven financial contagion are heterogeneous under several different settings, including market conditions, market development levels, regional subsets, and contagion directions.

Keywords: Financial contagion; Investor behavior; Google search; COVID-19; Pandemic (search for similar items in EconPapers)
JEL-codes: C32 C51 G15 G40 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:83:y:2022:i:c:s105752192200268x

DOI: 10.1016/j.irfa.2022.102315

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