Are Investors’ Attention and Uncertainty Aversion the Risk Factors for Stock Markets? International Evidence from the COVID-19 Crisis

Abstract

In this paper, we examine the impact of investors’ attention to COVID-19 on stock market returns and the moderating effect of national culture on this relationship. Using daily data from 34 countries over the period 23 January to 12 June 2020, and measuring investors’ attention with the Google search volume (GSV) of the word “coronavirus” for each country, we find that investors’ enhanced attention to the COVID-19 pandemic results in negative stock market returns. Further, measuring the national culture with the uncertainty avoidance index (the aspect of national culture which measures the cross-country differences in decision-making under stress and ambiguity), we find that the negative impact of investors’ attention on stock market returns is stronger in countries where investors possess higher uncertainty avoidance cultural values. Our findings imply that uncertainty avoidance cultural values of investors promote financial market instability amid the crisis.

Australian market response to COVID-19 as moderated by social media

“…As to the COVID-19 disease specifically, results are in line with studies that have demonstrated the correlation between internet user attention (typically Google metrics)as a gauge of panic and fearand either market returns (Costola et al, 2020;Vasileiou, 2020;Iyke and Ho, 2021;Shear et al, 2021;Smales, 2021;Subramaniam and Chakraborty, 2021) or their volatility (Ly ocsa et al, 2020). The present study evaluates the impact of SM user attention on the local Australian financial market, here proxied by the topic-related number of Tweets and similarly to Valle-Cruz et al (2021)their negative content.…”

“…These studies, none of them dedicated uniquely to the Australian market, typically use Google metrics (GSVs or GTs) with search terms such as "coronavirus" as a proxy of investor attention and fear (Costola et al, 2020;Vasileiou, 2020;Iyke and Ho, 2021;Ly ocsa et al, 2020;Shear et al, 2021;Smales, 2021;Subramaniam and Chakraborty, 2021).…”

“…Similar methodology was used by Subramaniam and Chakraborty (2021) and Vasileiou (2020), who found a strong negative and persistent association between COVID-19 fear and stock returns. Shear et al (2021) also used abnormal GSV of the word "coronavirus" as a proxy of investors' attention, finding that the negative impact of investors' attention on stock market returns was stronger in countries where investors possessed higher "uncertainty avoidance" cultural values. See also: Smales (2021), Iyke and Ho (2021) and Costola et al (2020), the last study was based on Google Trends.…”

The performance of Islamic versus conventional stocks during the COVID-19 shock: Evidence from firm-level data

“…MSCI world index have been widely used as the international equity market benchmark (e.g. ( Shear et al 2020 )). As Shown in Table 6 , our main results still hold after controlling for VIX and MSCI world index.…”

Evaluation of Changes on World Stock Exchanges in Connection with the SARS-CoV-2 Pandemic. Survival Analysis Methods

“…These contagion effects were found in both returns and stock market volatility. Shear et al (2021) in their study noted that increased investor attention to the COVID-19 pandemic resulted in negative stock market returns. This was particularly strong in countries where the investors held higher cultural values associated with avoiding uncertainty.…”