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The contagion of fake news concern and extreme stock market risks during the COVID-19 period

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  • Hong, Yun
  • Qu, Bo
  • Yang, Zhuohang
  • Jiang, Yanhui

Abstract

We investigate the spillover between fake news concern and extreme stock market risks during the COVID-19 period in six hard-hit developed and developing countries. Our results of employing the TVP-VAR connectedness approach suggest that total connectedness surged and peaked during the more uncertain period; fake news concern impacted the extreme stock market risk both domestically and abroad. Additionally, fake news concern in developed countries, especially the US, is more influential than that in developing countries. We also find that the impact of fake news concern on stock market extreme volatility decreases after the inclusion of legitimate news, and local fake news concern appears to have a greater impact than legitimate news concern in developing countries. Our research shows the importance of verifying the authenticity of information during a crisis.

Suggested Citation

  • Hong, Yun & Qu, Bo & Yang, Zhuohang & Jiang, Yanhui, 2023. "The contagion of fake news concern and extreme stock market risks during the COVID-19 period," Finance Research Letters, Elsevier, vol. 58(PA).
    • Handle: RePEc:eee:finlet:v:58:y:2023:i:pa:s154461232300630x
    DOI: 10.1016/j.frl.2023.104258
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    References listed on IDEAS

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    Cited by:

    1. Tiziana Assenza & Fabrice Collard & Patrick Fève & Stefanie Huber, 2024. "From Buzz to Bust: How Fake News Shapes the Business Cycle," ECONtribute Discussion Papers Series 287, University of Bonn and University of Cologne, Germany.
    2. Kocaarslan, Baris, 2023. "Funding liquidity risk and the volatility of U.S. municipal green bonds during the COVID-19 pandemic," Finance Research Letters, Elsevier, vol. 58(PD).

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    More about this item

    Keywords

    Fake news concern; Extreme stock market risk; Contagion; TVP-VAR model;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • 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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