COVID‐19, public attention and the stock market

Abstract

This paper investigates the impact of coronavirus disease 2019 (COVID‐19) on the Chinese stock market. We show that the COVID‐19 outbreak not only hurts the stock returns but also affects the stock price sensitivity to firm‐specific information. We document heterogeneous effects of the epidemic infection scale and the public attention about the pandemic. The stock market response to firm‐specific information is decelerated (accelerated) by the public attention (infection scale). Moreover, the decreasing (increasing) effect of the public attention (infection scale) on such response is more intensive to positively toned (negatively toned) firm‐specific news articles. Finally, we observe price reversal (momentum) following the public attention (infection scale).

Impact of COVID-19 on Expected Return and Risks in “China Concept” Stocks Using CAPM Model: A Case Study of Alibaba and Haidilao

“…Similar result is found by O'Donnell, who studies the negative impacts of the number of confirmed cases on the stock index of five countries by controlling variables [4]. Later, Xu, applying the GARCH model, finds the expected return in stock market is negatively related to the growth rate of total new cases based on the daily data in the US and Canada [5].…”

Feverish sentiment and global equity markets during the COVID-19 pandemic

“…Furthermore, the “asymmetric” effects of macro (common) factors improve the quality of forecasting power. Xu et al. (2020) This study constructed the new sentiment index with more accurate and critical news than state-controlled media from the study of You et al.…”

S&P 500 Index Price Spillovers around the COVID-19 Market Meltdown

“…Researchers have already explored the impact of the COVID-19 pandemic on the economy (e.g., Liu et al 2020;Padhan and Prabheesh 2021;Yagi and Managi 2021), policy responses (Gungoraydinoglu et al 2021;Makin and Layton 2021;Zaremba et al 2020), and society and policies in general (Tisdell 2020;Park and Chung 2021). With respect to financial markets, Bing and Ma (2021) categorize the large and growing body of literature across four groups, namely the impacts of COVID-19 on (a) firm and industry performances (e.g., Gu et al 2020;Qin et al 2020;Xiong et al 2020;Xu et al 2020); (b) stock return volatility (e.g., Al-Awadhi et al 2020;Dai et al 2021;Liu et al 2021); (c) fear sentiments (e.g., Baig et al 2020;Hoang and Syed 2021;Ortmann et al 2020); and (d) risk contagion (e.g., Corbet et al 2020Corbet et al , 2021Jiang et al 2020).…”

“…To date, the prior literature primarily focuses on market spillovers associated with the number of reported COVID-19 cases in a given country. For example, the consistent increase in reported COVID-19 cases and deaths resulted in lower stock returns in China (Al-Awadhi et al 2020), stock prices becoming more disconnected with firm-specific information (Xu et al 2020), and markets becoming more volatile and unpredictable due to the uncertainty raised by the COVID-19 pandemic. Increasing numbers of COVID-19 cases are also shown to have a negative relationship with Bitcoin initially and positively during a later period (Demir et al 2020).…”