PurposeThis study examines the impact of firm-specific information and macroeconomic variables on market overreaction of US and Chinese winner and loser portfolio before and during COVID-19.Design/methodology/approachThe firm-specific information includes firm size, volume, volatility, return of asset (ROA), return of equity (ROE), earning per share (EPS) and quick ratio while the macroeconomic variables are export rate, import rate, real GDP, nominal GDP, FDI, IPI and unemployment rate. Besides, one-third of the top performance stocks are categorized as winner portfolio while one-third of lowest performance stocks are categorized as loser portfolio. This study uses AECR to indicate stock return and measure market overreaction. GAECR is used to determine contrarian profit. The data range of pre-COVID-19 is from 1-Jan-2015 to 31-Dec-2019 while the period of COVID-19 is from 1-Jan-2020 to 31-Dec-2020.FindingsIn pre-COVID-19, firm-specific information (volatility, ROA, ROE and EPS) and macroeconomic variables are found to be correlated to stock return in US and Chinese portfolios except Chinese winner portfolio. Nonetheless, the impact of firm-specific information has vanished and macroeconomic variables are significant to stock return in COVID-19. It shows that investors rely on the economic indicators to trade in turbulent period due to emergence of COVID-19 as a disruption in market. Furthermore, US and Chinese portfolios are overreacted during COVID-19. Chinese loser portfolio has higher tendency of overreaction than US loser portfolio while US winner portfolio has higher tendency of overreaction than Chinese winner portfolio.Originality/valueThe results of this study assists academician, practitioners and investors on understanding and create awareness to the existence of market overreaction and the determinants that can cause the phenomenon.

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This study examines the impact of investor sentiment and market sentiment on overreaction in Europe and USA markets before and during COVID-19. The investor sentiment is calculated by the standard deviation, realized volatility, Parkinson’s estimator and Garman and Klass’s estimator. The market sentiment is measured by Business Confidence Index, Consumer Confidence Index, Labour Force Survey, Leading Index and Monetary Aggregates. The results of this study show that investor and market sentiments are correlated to stock return before COVID-19. Nonetheless, realized volatility is the only investor sentiment that is significant with the emergence of COVID-19. It shows that investors rely on the previous day’s stock prices to trade under market uncertainty. Market sentiment is observed to be insignificant in the pandemic. Furthermore, the existence of overreaction is detected in European portfolios but no evidence of overreaction is shown in the USA during pre-COVID-19. Surprisingly, overreaction is observed in Europe and USA markets in the pandemic. The USA market has a higher overreaction tendency than Europe. The results of this study assist academicians, practitioners and investors in understanding and creating awareness of the existence of market overreaction and its determinants before and during COVID-19.

Purpose This study aims to examine the existence of herding and the impact of economic and political factors in the Shariah-compliant stocks of Gulf Cooperation Council markets, namely, Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and United Arab Emirates. This study also seeks to explore the existence of herding under market stress and cross-stocks herding between Shariah-compliant and conventional stocks. Design/methodology/approach The data period is from 1 January 2016 to 31 December 2021. Panel data regression and panel quantile regression are used to examine herding. Findings The results show that herding tends to exist in Shariah stocks before the pandemic but is more pronounced in both types of stocks during the pandemic. The empirical evidence shows that economic factors are significant to herding before and during pandemic, whereas the political factors are only shown to be significant before COVID-19. Conventional stocks are correlated to the herding of Shariah stocks but the Shariah stocks have no significant impact on the herding of conventional stocks. Panel quantile regression shows that herding exists in extreme conditions but not all markets perform similarly. Originality/value The results of this study imply that the political factor can lead investors to herd. This political factor represents information that is used by investors to herd, consistent with the prediction of information-based theory of herding. Hence, policymakers and regulators need to be wary of any change in the political factors as they may cause movement in stock prices that deviate from fundamental value because of investor herding.

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