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

Byomakesh Debata, Kshitish Ghate and Jayashree Renganathan

Review of Behavioral Finance, 2021, vol. 15, issue 2, 176-204

Abstract: Purpose - This 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/approach - This 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. Findings - This 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/value - The 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.

Keywords: Behavioral finance; General financial markets; COVID-19 pandemic; C23; G10; G14; G15 (search for similar items in EconPapers)
Date: 2021
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (text/html)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (application/pdf)
Access to full text is restricted to subscribers

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:eme:rbfpps:rbf-05-2021-0083

DOI: 10.1108/RBF-05-2021-0083

Access Statistics for this article

Review of Behavioral Finance is currently edited by Professor Gulnur Muradoglu

More articles in Review of Behavioral Finance from Emerald Group Publishing Limited
Bibliographic data for series maintained by Emerald Support ().