TY - JOUR
T1 - From COVID-19 herd immunity to investor herding in international stock markets
T2 - the role of government and regulatory restrictions
AU - Kizys, Renatas
AU - Tzouvanas, Panagiotis
AU - Donadelli, Michael
N1 - Publisher Copyright:
© 2021 Elsevier Inc.
PY - 2021/3/1
Y1 - 2021/3/1
N2 - We study if government response to the novel coronavirus COVID-19 pandemic can mitigate investor herding behaviour in international stock markets. Our empirical analysis is informed by daily stock market data from 72 countries from both developed and emerging economies in the first quarter of 2020. The government response to the COVID-19 outbreak is measured by means of the Oxford COVID-19 Government Response Tracker, where higher scores are associated with greater stringency. Three main findings are in order. First, results show evidence of investor herding in international stock markets. Second, we document that the Oxford Government Response Stringency Index mitigates investor herding behaviour, by way of reducing multidimensional uncertainty. Third, short-selling restrictions, temporarily imposed by the national and supranational regulatory authorities of the European Union, appear to exert a mitigating effect on herding. Finally, our results are robust to a range of model specifications.
AB - We study if government response to the novel coronavirus COVID-19 pandemic can mitigate investor herding behaviour in international stock markets. Our empirical analysis is informed by daily stock market data from 72 countries from both developed and emerging economies in the first quarter of 2020. The government response to the COVID-19 outbreak is measured by means of the Oxford COVID-19 Government Response Tracker, where higher scores are associated with greater stringency. Three main findings are in order. First, results show evidence of investor herding in international stock markets. Second, we document that the Oxford Government Response Stringency Index mitigates investor herding behaviour, by way of reducing multidimensional uncertainty. Third, short-selling restrictions, temporarily imposed by the national and supranational regulatory authorities of the European Union, appear to exert a mitigating effect on herding. Finally, our results are robust to a range of model specifications.
KW - COVID-19
KW - international stock markets
KW - investor herding
KW - short-selling restrictions
KW - Stringency Index
UR - http://www.scopus.com/inward/record.url?scp=85099404047&partnerID=8YFLogxK
U2 - 10.1016/j.irfa.2021.101663
DO - 10.1016/j.irfa.2021.101663
M3 - Article
AN - SCOPUS:85099404047
SN - 1057-5219
VL - 74
JO - International Review of Financial Analysis
JF - International Review of Financial Analysis
M1 - 101663
ER -