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Pandemic-induced fear and stock market returns: Evidence from China

We construct a pandemic-induced fear (PIF) index to measure fear of the COVID-19 pandemic using Internet search volumes of the Chinese local search engine and empirically investigate the impact of fear of the pandemic on Chinese stock market returns. A reduced-bias estimation approach for multivaria...

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Detalles Bibliográficos
Autores principales: Su, Zhi, Liu, Peng, Fang, Tong
Formato: Online Artículo Texto
Lenguaje:English
Publicado: Elsevier Inc. 2022
Materias:
Acceso en línea:https://www.ncbi.nlm.nih.gov/pmc/articles/PMC9620495/
https://www.ncbi.nlm.nih.gov/pubmed/38013955
http://dx.doi.org/10.1016/j.gfj.2021.100644
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author Su, Zhi
Liu, Peng
Fang, Tong
author_facet Su, Zhi
Liu, Peng
Fang, Tong
author_sort Su, Zhi
collection PubMed
description We construct a pandemic-induced fear (PIF) index to measure fear of the COVID-19 pandemic using Internet search volumes of the Chinese local search engine and empirically investigate the impact of fear of the pandemic on Chinese stock market returns. A reduced-bias estimation approach for multivariate regression is employed to address the issue of small-sample bias. We find that the PIF index has a negative and significant impact on cumulative stock market returns. The impact of PIF is persistent, which can be explained by mispricing from investors' excessive pessimism. We further reveal that the PIF index directly predicts stock market returns through noise trading. Investors' Internet search behaviors enhance the fear of the pandemic, and pandemic-induced fear determines future stock market returns, rather than the number of cases and deaths caused by the COVID-19 pandemic.
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spelling pubmed-96204952022-10-31 Pandemic-induced fear and stock market returns: Evidence from China Su, Zhi Liu, Peng Fang, Tong Global Finance Journal Article We construct a pandemic-induced fear (PIF) index to measure fear of the COVID-19 pandemic using Internet search volumes of the Chinese local search engine and empirically investigate the impact of fear of the pandemic on Chinese stock market returns. A reduced-bias estimation approach for multivariate regression is employed to address the issue of small-sample bias. We find that the PIF index has a negative and significant impact on cumulative stock market returns. The impact of PIF is persistent, which can be explained by mispricing from investors' excessive pessimism. We further reveal that the PIF index directly predicts stock market returns through noise trading. Investors' Internet search behaviors enhance the fear of the pandemic, and pandemic-induced fear determines future stock market returns, rather than the number of cases and deaths caused by the COVID-19 pandemic. Elsevier Inc. 2022-11 2021-04-24 /pmc/articles/PMC9620495/ /pubmed/38013955 http://dx.doi.org/10.1016/j.gfj.2021.100644 Text en © 2021 Elsevier Inc. All rights reserved. Since January 2020 Elsevier has created a COVID-19 resource centre with free information in English and Mandarin on the novel coronavirus COVID-19. The COVID-19 resource centre is hosted on Elsevier Connect, the company's public news and information website. Elsevier hereby grants permission to make all its COVID-19-related research that is available on the COVID-19 resource centre - including this research content - immediately available in PubMed Central and other publicly funded repositories, such as the WHO COVID database with rights for unrestricted research re-use and analyses in any form or by any means with acknowledgement of the original source. These permissions are granted for free by Elsevier for as long as the COVID-19 resource centre remains active.
spellingShingle Article
Su, Zhi
Liu, Peng
Fang, Tong
Pandemic-induced fear and stock market returns: Evidence from China
title Pandemic-induced fear and stock market returns: Evidence from China
title_full Pandemic-induced fear and stock market returns: Evidence from China
title_fullStr Pandemic-induced fear and stock market returns: Evidence from China
title_full_unstemmed Pandemic-induced fear and stock market returns: Evidence from China
title_short Pandemic-induced fear and stock market returns: Evidence from China
title_sort pandemic-induced fear and stock market returns: evidence from china
topic Article
url https://www.ncbi.nlm.nih.gov/pmc/articles/PMC9620495/
https://www.ncbi.nlm.nih.gov/pubmed/38013955
http://dx.doi.org/10.1016/j.gfj.2021.100644
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