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Open accessJournal ArticleDOI: 10.1080/02692171.2020.1864301

Behavioral finance and market efficiency in the time of the COVID-19 pandemic: does fear drive the market?

04 Mar 2021-International Review of Applied Economics (Informa UK Limited)-Vol. 35, Iss: 2, pp 224-241
Abstract: In this study, we examine the efficiency of the US stock markets during the COVID-19 outbreak using a fundamental financial analysis approach, the constant growth model and a behavioral model inclu...

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6 results found

Open accessJournal ArticleDOI: 10.1080/1331677X.2021.1934509
07 Jun 2021-
Abstract: There is limited literature exploring the relationship between the sentiment of fear and bond markets. This study analyzes the influence of fear generated by the coronavirus on bond markets, partic...

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Topics: Yield (finance) (53%)

1 Citations

Open accessJournal ArticleDOI: 10.1002/WMH3.431
Evangelos Vasileiou1Institutions (1)
Abstract: The recent pandemic of COVID‐19 revealed that a highly transmissible virus threatens all humanity because extensive mobility, migration, and millions of passengers who travel worldwide shape our globalized environment and make containment of a virus more difficult In a war between humans and viruses, we should have the necessary weapons, such as masks, gloves, ventilators, and so forth However, during the COVID‐19 outbreak, there was a shortage of this basic medical and personal protective equipment (MAPPE), even for the health workers This note focuses on this issue and suggests that a global organization, which stores and renews basic MAPPE would be beneficial in the fight against the next pandemic and that such an organization can be established without significantly increasing the public expenses of the countries [ABSTRACT FROM AUTHOR] Copyright of World Medical & Health Policy is the property of Wiley-Blackwell and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission However, users may print, download, or email articles for individual use This abstract may be abridged No warranty is given about the accuracy of the copy Users should refer to the original published version of the material for the full abstract (Copyright applies to all Abstracts )

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Open accessJournal ArticleDOI: 10.1002/ISAF.1499
Evangelos Vasileiou1Institutions (1)
Abstract: Summary The purpose of this study is to examine the impact of the pandemic on the performance of stock markets, focusing on the behavioral influence of the fear due to COVID-19. Using a data set of 10 developed countries during the period December?31, 2019, to September?30, 2020, we examine the impact of COVID-19 on the performance of the stock markets. We incorporate the impact of the COVID-19 pandemic using the following variables: (a) the number of new COVID-19 cases, which was widely used as the main explanatory variable for market performance in early financial studies, and (b) a Google Search index, which collects the number of Google searches related to COVID-19 and incorporates the health risk and the fear of COVID-19 (the higher the number of searches for Covid terms, the higher the index value, and the higher the fear index). We employ our input into an EGARCH(1,1,1) model, and the findings show that the Google Search index enables us to draw statistically significant information regarding the impact of the COVID-19 fear on the performance of the stock markets. On the other hand, the variable of the number of new COVID-19 cases does not have any statistically significant influence on the performance of the stock markets. Google searches could be a useful tool for supporters of behavioral finance, scholars, and practitioners.

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Topics: Index (economics) (55%), Behavioral economics (50%)

Journal ArticleDOI: 10.1108/JFEP-02-2021-0038
Abstract: Purpose: This paper aims to investigate the moderating role of government policy interventions amid the early spread of novel coronavirus (COVID-19) (January–May 2020) on the investor sentiment and stock returns relationship. Design/methodology/approach: This paper uses panel data from a sample of 53 countries to examine the impact of investor sentiment, measured by the financial and economic attitudes revealed by the search (FEARS) index (Da et al., 2015) on the stock return. Findings: The moderating role of government policy response indices with the FEARS index on the global stock returns is further explored. This paper finds that government policy responses have a moderating role in the sentiment and stock returns relationship. The effect holds true even when countries are split based on five classifications, i.e. cultural distance, health standard, government effectiveness, social well-being and financial development. The results are robust to an alternative measure of pandemic search intensity, quantile regression and two measures of stock market activity, i.e. conditional volatility and exchange traded fund returns. Research limitations/implications: The sample period of this study encompasses the early spread phase (January–May 2020) of the novel COVID-19 spread. Originality/value: This paper provides some early evidence on whether the government policy interventions are helpful to mitigate the impact of investor sentiment on the stock market. The paper also helps to shed better insights on the role of different country characteristics for the sentiment and stock return relationship. © 2021, Emerald Publishing Limited.

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Topics: Stock market (60%), Exchange-traded fund (54%), Stock (geology) (52%) ... read more


35 results found

Journal ArticleDOI: 10.2307/1912791
Clive W. J. Granger1Institutions (1)
01 Aug 1969-Econometrica
Abstract: There occurs on some occasions a difficulty in deciding the direction of causality between two related variables and also whether or not feedback is occurring. Testable definitions of causality and feedback are proposed and illustrated by use of simple two-variable models. The important problem of apparent instantaneous causality is discussed and it is suggested that the problem often arises due to slowness in recording information or because a sufficiently wide class of possible causal variables has not been used. It can be shown that the cross spectrum between two variables can be decomposed into two parts, each relating to a single causal arm of a feedback situation. Measures of causal lag and causal strength can then be constructed. A generalisation of this result with the partial cross spectrum is suggested.

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14,541 Citations

Open accessBook
Daniel Kahneman1Institutions (1)
01 Jan 2011-
Abstract: Buku terlaris New York Times Pemenang Penghargaan Buku Terbaik Akademi Sains Nasional pada tahun 2012 Dipilih oleh New York Times Book Review sebagai salah satu dari sepuluh buku terbaik tahun 2011 A Globe and Mail Judul Buku Terbaik Tahun 2011 Salah Satu Buku The Economist tahun 2011 Salah Satu Buku Nonfiksi Terbaik The Wall Street Journal of the Year 2011 2013 Presidential Medal of Freedom Recipient Pekerjaan Kahneman dengan Amos Tversky adalah subyek dari Proyek Undoing Michael Lewis: Persahabatan yang Mengubah Pikiran Kita Dalam buku terlaris internasional, Berpikir, Cepat, dan Lambat, Daniel Kahneman, psikolog terkenal dan pemenang Hadiah Nobel dalam Ekonomi, membawa kita pada perjalanan pemikiran yang inovatif dan menjelaskan dua sistem yang mendorong cara kita berpikir. Sistem 1 cepat, intuitif, dan emosional; Sistem 2 lebih lambat, lebih deliberatif, dan lebih logis. Dampak dari terlalu percaya pada strategi perusahaan, kesulitan memprediksi apa yang akan membuat kita bahagia di masa depan, efek mendalam dari bias kognitif dalam segala hal mulai dari bermain pasar saham hingga merencanakan liburan kita berikutnya ― masing-masing dapat dipahami hanya dengan mengetahui bagaimana kedua sistem tersebut membentuk penilaian dan keputusan kami. Melibatkan pembaca dalam percakapan yang hidup tentang bagaimana kita berpikir, Kahneman mengungkapkan di mana kita bisa dan tidak dapat mempercayai intuisi kita dan bagaimana kita dapat memanfaatkan manfaat dari pemikiran yang lambat. Dia menawarkan wawasan praktis dan mencerahkan tentang bagaimana pilihan dibuat baik dalam bisnis kita dan kehidupan pribadi kita ― dan bagaimana kita dapat menggunakan teknik yang berbeda untuk menjaga gangguan mental yang sering membawa kita ke dalam masalah. Pemenang Penghargaan Buku Terbaik Akademi Sains Nasional dan Hadiah Buku Los Angeles Times dan dipilih oleh The New York Times Book Review sebagai salah satu dari sepuluh buku terbaik tahun 2011, Berpikir, Cepat dan Lambat ditakdirkan menjadi klasik.

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12,972 Citations

Journal ArticleDOI: 10.1016/0304-4076(92)90104-Y
Abstract: We propose a test of the null hypothesis that an observable series is stationary around a deterministic trend. The series is expressed as the sum of deterministic trend, random walk, and stationary error, and the test is the LM test of the hypothesis that the random walk has zero variance. The asymptotic distribution of the statistic is derived under the null and under the alternative that the series is difference-stationary. Finite sample size and power are considered in a Monte Carlo experiment. The test is applied to the Nelson-Plosser data, and for many of these series the hypothesis of trend stationarity cannot be rejected.

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Topics: KPSS test (72%), Unit root test (70%), Test statistic (69%) ... read more

9,121 Citations

Open accessBook
Richard H. Thaler1, Cass R. Sunstein1Institutions (1)
08 Apr 2008-
Abstract: A groundbreaking discussion of how we can apply the new science of choice architecture to nudge people toward decisions that will improve their lives by making them healthier, wealthier, and more free Every day, we make decisions on topics ranging from personal investments to schools for our children to the meals we eat to the causes we champion. Unfortunately, we often choose poorly. Nobel laureate Richard Thaler and legal scholar and bestselling author Cass Sunstein explain in this important exploration of choice architecture that, being human, we all are susceptible to various biases that can lead us to blunder. Our mistakes make us poorer and less healthy; we often make bad decisions involving education, personal finance, health care, mortgages and credit cards, the family, and even the planet itself. In Nudge, Thaler and Sunstein invite us to enter an alternative world, one that takes our humanness as a given. They show that by knowing how people think, we can design choice environments that make it easier for people to choose what is best for themselves, their families, and their society. Using colorful examples from the most important aspects of life, Thaler and Sunstein demonstrate how thoughtful "choice architecture" can be established to nudge us in beneficial directions without restricting freedom of choice. Nudge offers a unique new take-from neither the left nor the right-on many hot-button issues, for individuals and governments alike. This is one of the most engaging and provocative books to come along in many years.

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7,762 Citations

Open accessJournal ArticleDOI: 10.1111/J.1540-6261.1985.TB05004.X
01 Jul 1985-Journal of Finance
Abstract: Research in experimental psychology suggests that, in violation of Bayes' rule, most people tend to "overreact" to unexpected and dramatic news events. This study of market efficiency investigates whether such behavior affects stock prices. The empirical evidence, based on CRSP monthly return data, is consistent with the overreaction hypothesis. Substantial weak form market inefficiencies are discovered. The results also shed new light on the January returns earned by prior "winners" and "losers." Portfolios of losers experience exceptionally large January returns as late as five years after portfolio formation. As ECONOMISTS INTERESTED IN both market behavior and the psychology of individual decision making, we have been struck by the similarity of two sets of empirical findings. Both classes of behavior can be characterized as displaying overreaction. This study was undertaken to investigate the possibility that these phenomena are related by more than just appearance. We begin by describing briefly the individual and market behavior that piqued our interest. The term overreaction carries with it an implicit comparison to some degree of reaction that is considered to be appropriate. What is an appropriate reaction? One class,,of tasks which have a well-established norm are probability revision problems for which Bayes' rule prescribes the correct reaction to new information. It has now been well-established that Bayes' rule is not an apt characterization of how individuals actually respond to new data (Kahneman et al. [14]). In revising their beliefs, individuals tend to overweight recent information and underweight prior (or base rate) data. People seem to make predictions according to a simple matching rule: "The predicted value is selected so that the standing of the case in the distribution of outcomes matches its standing in the distribution of impressions" (Kahneman and Tversky [14, p. 416]). This rule-of-thumb, an instance of what Kahneman and Tversky call the representativeness heuristic, violates the basic statistical principal that the extremeness of predictions must be moderated by considerations of predictability. Grether [12] has replicated this finding under incentive compatible conditions. There is also considerable evidence that the actual expectations of professional security analysts and economic forecasters display the same overreaction bias (for a review, see De Bondt [7]). One of the earliest observations about overreaction in markets was made by J. M. Keynes:"... day-to-day fluctuations in the profits of existing investments,

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6,688 Citations