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. 2022 May:81:102111.
doi: 10.1016/j.irfa.2022.102111. Epub 2022 Mar 11.

Constructing a positive sentiment index for COVID-19: Evidence from G20 stock markets

Dimitris Anastasiou  1   2 , Antonis Ballis  2 , Konstantinos Drakos  3
Affiliations

Constructing a positive sentiment index for COVID-19: Evidence from G20 stock markets

Dimitris Anastasiou et al. Int Rev Financ Anal. 2022 May.

Abstract

The present study investigates the degree of market responses through the scope of investors' sentiment during the COVID-19 pandemic across G20 markets by constructing a novel positive search volume index for COVID-19 (COVID19+). Our key findings, obtained using a Panel-GARCH model, indicate that an increased COVID19+ index suggests that investors decrease their COVID-19 related crisis sentiment by escalating their Google searches for positively associated COVID-19 related keywords. Specifically, we explore the predictive power of the newly constructed index on stock returns and volatility. According to our findings, investor sentiment positively (negatively) predicts the stock return (volatility) during the COVID-19. This is the first study assessing global sentiment by proposing a novel proxy and its impacts on the G20 equity market.

Keywords: COVID-19; G20; Panel-GARCH; Sentiment; Stock markets.

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Conflict of interest statement

No conflict of interest exits in the submission of this manuscript, and this manuscript is approved by all authors for publication.

Figures

Fig. 1
Fig. 1
Graphical representation of the daily Google search volumes provided by the Google Trends Database. Source: Google Trends.
Fig. 2
Fig. 2
Graphical representation of the daily COVID19− index (Average across G20). Source: Google Trends, Own estimates. Notes: This Figure shows the daily COVID19− index as average across the G20 markets. Specifically, the left (right) panel depicts the COVID19− index constructed with the PCA (simple average) method. For their construction we employed the Google search keywords reported in Table 1, and which were firstly proposed by Subramaniam and Chakraborty (2021).
Fig. 3
Fig. 3
Graphical representation of the daily COVID19+ index (Average across G20).
Fig. 4
Fig. 4
Graphical representation of the lowess smoother between daily stock prices and COVID19− index (Average across G20).
Fig. 5
Fig. 5
Graphical representation of the lowess smoother between daily stock prices and COVID19+ index (Average across G20).
Fig. 6
Fig. 6
Graphical representation of the lowess smoother between daily stock prices and NETP index (Average across G20).
See this image and copyright information in PMC

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