Information Search and Financial Markets under COVID-19

Abstract

The discovery and sudden spread of the novel coronavirus (COVID-19) exposed individuals to a great uncertainty about the potential health and economic ramifications of the virus, which triggered a surge in demand for information about COVID-19. To understand financial market implications of individuals’ behavior upon such uncertainty, we explore the relationship between Google search queries related to COVID-19—information search that reflects one’s level of concern or risk perception—and the performance of major financial indices. The empirical analysis based on the Bayesian inference of a structural vector autoregressive model shows that one unit increase in the popularity of COVID-19-related global search queries, after controlling for COVID-19 cases, results in 0.038 – 0.069 % of a cumulative decline in global financial indices after one day and 0.054 – 0.150 % of a cumulative decline after one week.

Risk perception and oil and gasoline markets under COVID-19

“…Our strategy to use Google search queries to capture information search or risk perception is in line with previous studies 1 and concurrent work on COVID-19 ( Ahundjanov et al, 2020a ; Amstad, Cornelli, Gambacorta, & Xia, 2020; Barrios & Hochberg, 2020 ; Papadamou, Fassas, Kenourgios, & Dimitriou, 2020 ). 2 As Da et al (2011) pointed out, “aggregate search frequency in Google is a direct and unambiguous measure of attention” which allows for “capturing investor attention in a more timely fashion”.…”

“…The increasing gravity of the situation induced large-scale social and behavioral changes as well as introduction of unprecedented policies, including travel restrictions, school and business closures, and stay-at-home orders. The global economy ( Baldwin and di Mauro, 2020 , Yilmazkuday, 2020a ) and financial markets ( Ahundjanov, Akhundjanov, & Okhunjanov, 2020a ; Baker et al, 2020 ; Yilmazkuday, 2020c ) have inevitably felt the brunt of such measures. Understanding the economic and financial and commodity market implications of individuals’ behaviors under a pandemic represents an important consideration, both for policy design and financial strategy and planning.…”

“…Our empirical analysis is based on daily data between January 22, 2020 and July 2, 2020 and a structural vector autoregressive (SVAR) model, where the endogenous variables are the percentage change in daily global Google search queries related to COVID-19 and the percentage change in daily oil and gasoline market price (Brent crude oil price, West Texas Intermediate crude oil price, New York Harbor Conventional Gasoline Regular spot price, Dow Jones US Oil & Gas Total index). Because COVID-19 is an exogenous shock, the percentage change in daily global COVID-19 confirmed cases (and deaths) is included in this framework as an exogenous variable, similar to Ahundjanov et al (2020a) and Yilmazkuday (2020a) , Yilmazkuday (2020b) and Yilmazkuday (2020c) .…”

“…Our study lies at the intersection of nascent literature on behavioral aspects of COVID-19 ( Ahundjanov et al, 2020a , Barrios and Hochberg, 2020 ) and oil and gasoline market implications of the pandemic ( Albulescu, 2020 , Yilmazkuday, 2020b ). The endeavor undertaken here bridges these two lines of literature, furthering our understanding of oil and gasoline market consequences of individuals’ risk perception under a pandemic, which is essential for policy design and financial strategy and planning.…”

Have Stock Markets across the Globe Been Kidnapped by the Covid-19 Pandemic?

“…The related evidences of the paper assert that the Covid-19 pandemic contributes to the amplified level of risk-aversion. Ahundjanov et al (2020) investigate the relationship between the Google search queries for Covid-19 and the major market indices. Their empirical evidences find that the increase of the Covid-19 online search is significantly related to the greater cumulative decline of market indices.…”