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Investor Sentiment and Stock Market Reactions to COVID-19: Evidence from China

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  • Lin Sun
  • Wei Shi
  • Wen-Tsao Pan

Abstract

This paper treats the outbreak of coronavirus disease 2019 (COVID-19) as a natural experiment that can provide insights into the effects of investor sentiment on stock market reactions. Employing the event study methodology (ESM) and taking the date of the Wuhan lockdown as the event date, we find that average abnormal return (AAR) and cumulative abnormal return (CAR) are significantly negative, and average trading volume excesses far more than before within two days of the outbreak. Further, we establish a difference-in-differences (DID) model to investigate the differences between Hubei and non-Hubei listed companies. The results show that for Hubei listed companies, the change of excessive trading volume (ETV) between pre-event and post-event period is significantly higher than that of non-Hubei listed companies, while there exhibits no relationship between the change of AAR and registration place. Overall, our findings provide new evidence for the interaction of local bias and investor sentiment affecting stock market reactions.

Suggested Citation

  • Lin Sun & Wei Shi & Wen-Tsao Pan, 2022. "Investor Sentiment and Stock Market Reactions to COVID-19: Evidence from China," Discrete Dynamics in Nature and Society, Hindawi, vol. 2022, pages 1-10, May.
    • Handle: RePEc:hin:jnddns:8413916
    DOI: 10.1155/2022/8413916
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    Cited by:

    1. Nicolae-Marius Jula & Diana-Mihaela Jula & Bogdan Oancea & Răzvan-Mihail Papuc & Dorin Jula, 2023. "Changes in the Pattern of Weekdays Electricity Real Consumption during the COVID-19 Crisis," Energies, MDPI, vol. 16(10), pages 1-20, May.

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