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

Sowmya Subramaniam and Madhumita Chakraborty

Review of Behavioral Finance, 2021, vol. 13, issue 1, 40-50

Abstract: Purpose - The 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/approach - To 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 ( 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. Findings - The 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/value - The 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.

Keywords: Investor attention; Covid-19 fear; Stock market returns (search for similar items in EconPapers)
Date: 2021
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