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Sowmya Subramaniam (Finance and Accounting, Indian Institute of Management Lucknow, Lucknow, India)
Madhumita Chakraborty (Finance and Accounting, Indian Institute of Management Lucknow, Lucknow, India)
ISSN: 1940-5979
Article publication date: 10 March 2021
Issue publication date: 20 March 2021
4646
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 (http://www.Google.com/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
Acknowledgements
The authors are thankful to the Editor and the anonymous reviewers for their valuable comments and suggestions for improvement.
Citation
Subramaniam, S. and Chakraborty, M. (2021), "COVID-19 fear index: does it matter for stock market returns?", Review of Behavioral Finance, Vol. 13 No. 1, pp. 40-50. https://doi.org/10.1108/RBF-08-2020-0215
Publisher
:Emerald Publishing Limited
Copyright © 2021, Emerald Publishing Limited
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