In search of COVID-19: analysis of the impact of negative investor sentiment on ASEAN-6 stock markets using Google trends data
Date
2023-05-12
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
Abstract
This study analyzes the effects of negative retail investor sentiment regarding COVID- 19 on the stock market indices of six countries in the Association of Southeast Asian Nations (ASEAN), namely Indonesia, Malaysia, the Philippines, Singapore, Thailand, and Vietnam. We argue that investors demand more information in times of uncertainty (e.g., pandemics) to lessen their exposure to risk, which in turn influences their behavior in the stock market. Using weekly data from January 2020 to July 2022 to
capture the beginning, peak, and decline of the pandemic, we analyze the abnormal increase in Google search volume relating to COVID-19 to measure uncertainty and panic in investor behavior. In particular, we used the “Coronavirus disease 2019” topic in Google Trends as a proxy for negative investor sentiment relating to the pandemic.
Using pooled ordinary least squares, we found that negative investor sentiment has a significant adverse effect on ASEAN stock market returns. Our fixed effects regression
showed that negative investor sentiment has a significant positive effect on ASEAN stock market volatility. Our findings also suggest that negative investor sentiment has
a greater effect on ASEAN stock markets than changes in new COVID-19 cases. These results are robust after controlling for relevant factors such as government
stringency measures, financial market size, oil prices, real exchange rates, and global interest rates. The growth of new COVID-19 cases has a significant negative effect on stock market returns. Faster growth in new vaccinations positively impacts returns as well.
Description
Keywords
COVID-19, ASEAN, stock returns, volatility, investor sentiment, Google trends