The Investor Psychology and Stock Market Behavior During the Initial Era of COVID-19: A Study of China, Japan, and the United States

Abstract

A highly transmittable and pathogenic viral infection, COVID-19, has dramatically changed the world with a tragically large number of human lives being lost. The epidemic has created psychological resilience and unbearable psychological pressure among patients and health professionals. The objective of this study is to analyze investor psychology and stock market behavior during COVID-19. The psychological behavior of investors, whether positive or negative, toward the stock market can change the picture of the economy. This research explores Shanghai, Nikkei 225, and Dow Jones stock markets from January 20, 2020, to April 27, 2020, by employing principal component analysis. The results showed that investor psychology was negatively related to three selected stock markets under psychological resilience and pandemic pressure. The negative emotions and pessimism urge investors to cease financial investment in the stock market, and consequently, the stock market returns decreased. In a deadly pandemic, the masses were more concerned about their lives and livelihood and less about wealth and leisure. This research contributes to the literature gap of investors’ psychological behavior during a pandemic outbreak. The study suggests that policy-makers should design a plan to fight against COVID-19. The government should manage the health sector’s budget to overcome future crises.

Exploring Herding Behaviour in Indian Equity Market during COVID-19 Pandemic: Impact of Volatility and Government Response

“…Extreme volatility results in herding, especially for emerging equity markets such as Turkey (Balcilar & Demirer, 2015), Spain (Blasco et al, 2012;Pochea et al, 2017) and China (Chiang et al, 2013). The COVID-19 pandemic has engulfed financial markets with negative sentiment thereby increasing volatility (Ali et al, 2020;Chen et al, 2014;Haritha & Rishad, 2020;Naseem et al, 2021) which is the main reason for herding in the stock markets. Aslam et al (2020) argue that European markets witnessed non-rational investing and behaved like roller coasters during COVID-19 outbreak period that resulted in herding.…”

COVID-19 and Greenhouse Gas Emission Mitigation: Modeling the Impact on Environmental Sustainability and Policies

“…Table 3 contains the result of the bound test, which is generally used to check the binding of variables for long-term and shortterm interactions. This test is based on the mixture of integrated results of ADF to avoid spurious results (Naseem et al, 2021;Sarfraz et al, 2021). The value of F-statistics is higher than tabulated, which confirms the significance of all variables at 1% significance level.…”

“…The COVID-19 parameters for structuring the models are lockdown, and confirmed cases and confirmed deaths of COVID-19. The last term of the equation ε t is an indication of an error term that measures data disturbance (Dar et al, 2021;Naseem et al, 2021;Sarfraz et al, 2021).…”

Equity Structure, Strategic Investment Psychology, and Performance in China’s Green Economy Context

“…Chen V. Z. et al (2014) have proposed a principal component approach to measuring investor sentiment (Chen H. et al, 2014), andNaseem et al (2021) use similar methods to measure and test the influence of investor psychology on stock market behavior. However, due to the inability to collect multiindicator data, we use the ratio of R&D expenditures in green technologies to the total sales income as indicator of green R&D investment psychology.…”