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Are Investors’ Attention and Uncertainty Aversion the Risk Factors for Stock Markets? International Evidence from the COVID-19 Crisis

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  • Falik Shear

    (Department of Management Sciences, National Textile University, Faisalabad 37610, Pakistan)

  • Badar Nadeem Ashraf

    (School of Finance, Jiangxi University of Finance and Economics, Nanchang 330013, China)

  • Mohsin Sadaqat

    (NUST Business School, National University of Sciences and Technology, Islamabad 44000, Pakistan)

Abstract

In this paper, we examine the impact of investors’ attention to COVID-19 on stock market returns and the moderating effect of national culture on this relationship. Using daily data from 34 countries over the period 23 January to 12 June 2020, and measuring investors’ attention with the Google search volume (GSV) of the word “coronavirus” for each country, we find that investors’ enhanced attention to the COVID-19 pandemic results in negative stock market returns. Further, measuring the national culture with the uncertainty avoidance index (the aspect of national culture which measures the cross-country differences in decision-making under stress and ambiguity), we find that the negative impact of investors’ attention on stock market returns is stronger in countries where investors possess higher uncertainty avoidance cultural values. Our findings imply that uncertainty avoidance cultural values of investors promote financial market instability amid the crisis.

Suggested Citation

  • Falik Shear & Badar Nadeem Ashraf & Mohsin Sadaqat, 2020. "Are Investors’ Attention and Uncertainty Aversion the Risk Factors for Stock Markets? International Evidence from the COVID-19 Crisis," Risks, MDPI, vol. 9(1), pages 1-15, December.
    • Handle: RePEc:gam:jrisks:v:9:y:2020:i:1:p:2-:d:466308
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    2. Ashraf, Badar Nadeem & Goodell, John W., 2022. "The impact of social cohesion on stock market resilience: Evidence from COVID-19," Journal of Behavioral and Experimental Finance, Elsevier, vol. 36(C).
    3. shear, Falik & Ashraf, Badar Nadeem, 2022. "The performance of Islamic versus conventional stocks during the COVID-19 shock: Evidence from firm-level data," Research in International Business and Finance, Elsevier, vol. 60(C).

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