Explaining stock markets' performance during the COVID-19 crisis: Could Google searches be a significant behavioral indicator?
16 Aug 2021-International Journal of Intelligent Systems in Accounting, Finance & Management (John Wiley & Sons, Ltd)-Vol. 28, Iss: 3, pp 173-181
TL;DR: 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.
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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TL;DR: In this article , the authors examined the effects of Covid-19 on the narratives of these China opportunities and found that the worldwide narratives on the roles of Chinese outward foreign direct investment, Chinese trade, and China's Belt and Road Initiative have experienced a structural break after 2020.
Abstract: ABSTRACT China’s rapid economic growth has generated many economic opportunities for the world through outward foreign direct investment, trade, and its iconic Belt and Road Initiative. This study aims to examine the effects of Covid-19 on the narratives of these China opportunities. Based on weekly datasets between May 2016 and May 2021 and employing Autoregressive Distributed Lag Models, this study finds the worldwide narratives on the roles of Chinese outward foreign direct investment, Chinese trade, and China’s Belt and Road Initiative have experienced a structural break after 2020. Before 2020, they were generally regarded as opportunities. During the pandemic, their roles have changed significantly. The outbreak of Covid-19 and its development in the world may play a critical role in this structural break. This study is broadly related to the debate around decoupling from China and the China opportunity paradigm. This study contributes to policy discussions by taking a new perspective and providing novel empirical evidence, and contributes to academia through its quantitative approach.
2 citations
TL;DR: In this paper , a method for identifying international accounting differences under International Financial Reporting Standards (IFRS) using Google Trends data extracted between January 2014 and August 2022, it creates an index, the Global IFRS/IAS Search Index (GISI), which comprises the search activities of 121 jurisdictions for 45 IFRS accounting standards.
Abstract: This study proposes a novel method for identifying international accounting differences under International Financial Reporting Standards (IFRS). Using Google Trends data extracted between January 2014 and August 2022, it creates an index, the Global IFRS/IAS Search Index (GISI), which comprises the search activities of 121 jurisdictions for 45 IFRS accounting standards. To assess its relative validity, I classify Nobes' (1983) 14 jurisdictions in addition to 20 OECD countries. The cluster analysis demonstrates that the GISI is a viable alternative for analyzing international differences under IFRS. The results indicate that incorporating big data could be beneficial for examining global accounting issues. A judgmental international classification of financial reporting practices
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TL;DR: In this paper , the authors examined the short and long-term equilibrium relationship between All share price index (ASPI), macroeconomic variables and the economic crisis in Sri Lanka and found a long-run stable relationship between stock price, macroeconomic variable and political crisis (i.e., CPI, IP, ER, TB, and economic crisis).
Abstract: PurposeThis study aims to examine the short- and long-term equilibrium relationship between All share price index (ASPI), macroeconomic variables and the economic crisis in Sri Lanka.Design/methodology/approachMonthly time series data for inflation (CPI), industrial production (IP), an exchange rate (EX), an interest rate (TB), short-term interest rate (CD) and economic crisis were used from 2010 to 2021. The ADF test, the bound testing approach, the CUSUM test and the CUSUMQ test were used in this study.FindingsThe findings show a long-run stable relationship between stock price, macroeconomic variables and political crisis (i.e., CPI, IP, ER, TB, CD and economic crisis). The results of the Johansen cointegration test suggest that there is at least one cointegrating equation, indicating that there is a long-run equilibrium relationship between macroeconomic variables and stock prices in Sri Lanka.Research limitations/implicationsThe vector error correction estimates show that the coefficient of the error correction term is significant with a negative sign, indicating that a long-run dynamic relationship exists between macroeconomic variables and stock prices. In the short term, economic crisis has had a big effect on stock prices suggesting that Sri Lanka’s domestic financial markets are linked to the stability of the country.Originality/valueThis research establishes the links between stock returns, macroeconomic variables and economic crisis. So far, research has been unable to establish the empirical nature of such links. The authors believe that this paper fills that gap.
References
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TL;DR: In this article, the authors estimate the extent to which various assets were hedges against the expected and unexpected components of the inflation rate during the 1953-1971 period and find that U.S. government bonds and bills were a complete hedge against expected inflation, and private residential real estate was a complete hedging against both expected and expected inflation.
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TL;DR: In this paper, it was shown that analysts exhibit herding behavior, whereby they release forecasts similar to those previously announced by other analysts, even when this is not justified by their information.
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911 citations
"Explaining stock markets' performan..." refers background in this paper
...…in our results concerning the influence of the Google index on market performance.10 Moreover, the Google Trends tool could be useful to behavioral finance supporters and practitioners who pay significant attention to herding behavior (Clement & Tse, 2005; Demirer & Kutan, 2006; Trueman, 1994)....
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TL;DR: The findings indicate that both the daily growth in total confirmed cases and in total cases of death caused by COVID-19 have significant negative effects on stock returns across all companies.
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