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Stock markets' reaction to COVID-19: the joint impact of uncertainty avoidance culture and government response - evidence from emerging countries

Author

Listed:
  • Thu Ha Tran

    (BSB - Burgundy School of Business (BSB) - ESC Dijon-Bourgogne, CEREN - Centre de Recherche sur les Entreprises - BSB - Burgundy School of Business (BSB) - ESC Dijon-Bourgogne)

  • Henri Tran

    (BSB - Burgundy School of Business (BSB) - ESC Dijon-Bourgogne, CEREN - Centre de Recherche sur les Entreprises - BSB - Burgundy School of Business (BSB) - ESC Dijon-Bourgogne)

Abstract

The authors examine whether the uncertainty avoidance culture and the stringency of government response play a role in shaping the stock market's response to coronavirus disease 2019 (COVID-19). The authors find that investors' response to the pandemic will not only depend on their instinct of uncertainty aversion but also on their expectation about the effectiveness of the government measures. The uncertainty avoidance culture amplifies the irrational actions of investors. However, harsh government responses will weaken this effect. Harsh government responses also send a negative signal to the market about the extent of the pandemic and the economic damage caused by anti-COVID measures. Governments need to be balanced in imposing anti-COVID measurements to preserve market confidence.

Suggested Citation

  • Thu Ha Tran & Henri Tran, 2023. "Stock markets' reaction to COVID-19: the joint impact of uncertainty avoidance culture and government response - evidence from emerging countries," Post-Print hal-05846098, HAL.
    • Handle: RePEc:hal:journl:hal-05846098
    DOI: 10.1108/RBF-08-2021-0146
    as

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