Diverse investor reactions to the COVID-19 Pandemic: Insights from an emerging market

Suman Neupane, Zhebin Fan, Daniel Yanes Sanchez and Biwesh Neupane

Journal of International Financial Markets, Institutions and Money, 2024, vol. 93, issue C

Abstract: We examine the reaction of different investor categories to the COVID-19 pandemic in the Indian market throughout 2020. Using quarterly ownership data, we find significant differences across various investor categories during the crisis and post-crisis periods. We find that domestic institutional investors (DIIs) exhibit 'flight-to-quality' behavior, foreign institutional investors (FIIs) exhibit 'fire-sale' behavior, and retail investors (RIs) act as informed investors who provide liquidity during the crisis period. We observe conservative behavior from DIIs and FIIs throughout 2020, during which RIs initially increase their holdings in high-risk stocks but move to high-quality stocks in the final quarter of 2020. FIIs contribute the most to lower stock returns and higher volatility during the crisis period. Using daily FII trade-level data, we find that long-term FIIs start buying high-quality stocks before other categories in the post-crisis period, with short-term FIIs driving returns and volatility during the crisis period.

Keywords: COVID-19; Crises; Institutional Investors; Foreign Institutional Investors; Retail Investors; Investor Horizon; Emerging Market (search for similar items in EconPapers)
JEL-codes: G01 G12 G41 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1042443124000660
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:intfin:v:93:y:2024:i:c:s1042443124000660

DOI: 10.1016/j.intfin.2024.102000

Access Statistics for this article

Journal of International Financial Markets, Institutions and Money is currently edited by I. Mathur and C. J. Neely

More articles in Journal of International Financial Markets, Institutions and Money from Elsevier
Bibliographic data for series maintained by Catherine Liu ().