Are Investors’ Attention and Uncertainty Aversion the Risk Factors for Stock Markets? International Evidence from the COVID-19 Crisis

Falik Shear, Badar Nadeem Ashraf and Mohsin Sadaqat
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Falik Shear: Department of Management Sciences, National Textile University, Faisalabad 37610, Pakistan
Mohsin Sadaqat: NUST Business School, National University of Sciences and Technology, Islamabad 44000, Pakistan

Risks, 2020, vol. 9, issue 1, 1-15

Abstract: In this paper, we examine the impact of investors’ attention to COVID-19 on stock market returns and the moderating effect of national culture on this relationship. Using daily data from 34 countries over the period 23 January to 12 June 2020, and measuring investors’ attention with the Google search volume (GSV) of the word “coronavirus” for each country, we find that investors’ enhanced attention to the COVID-19 pandemic results in negative stock market returns. Further, measuring the national culture with the uncertainty avoidance index (the aspect of national culture which measures the cross-country differences in decision-making under stress and ambiguity), we find that the negative impact of investors’ attention on stock market returns is stronger in countries where investors possess higher uncertainty avoidance cultural values. Our findings imply that uncertainty avoidance cultural values of investors promote financial market instability amid the crisis.

Keywords: COVID-19; investors’ attention; stock market returns; national culture; uncertainty avoidance (search for similar items in EconPapers)
JEL-codes: C G0 G1 G2 G3 K2 M2 M4 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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