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Global contagion of US COVID-19 panic news

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  • Kang, Yong Joo
  • Park, Dojoon
  • Eom, Young Ho

Abstract

We investigate the contagion of US COVID-19 panic news, measured by the sentiment-based RavenPack US Panic Index, on the local stock market returns of 48 countries. Local stock market returns are found to be more significantly negatively associated with the US panic news than local panic news. Our results show that a 1% increase in the US Panic Index reduces local stock returns by 1.44%. The result holds for regional and subregional groupings and are robust to alternative measures of COVID-19 information. Furthermore, our contagion channel analysis shows that the differences of opinion channel is the key contagion transmission channel from the US to local markets. This alludes to the investor behavior contagion view, and not the fundamental contagion view, being the main driver of global contagion during the pandemic.

Suggested Citation

  • Kang, Yong Joo & Park, Dojoon & Eom, Young Ho, 2024. "Global contagion of US COVID-19 panic news," Emerging Markets Review, Elsevier, vol. 59(C).
    • Handle: RePEc:eee:ememar:v:59:y:2024:i:c:s1566014124000116
    DOI: 10.1016/j.ememar.2024.101116
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    More about this item

    Keywords

    COVID-19; Pandemic; Panic index; Sentiment; Contagion;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • G01 - Financial Economics - - General - - - Financial Crises
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets

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