Investor Sentiment and Stock Returns During the COVID-19 Pandemic

Baozhen Jiang; Haojie Zhu; Jinhua Zhang; Cheng Yan; Rui Shen

doi:10.3389/fpsyg.2021.708537

Investor Sentiment and Stock Returns During the COVID-19 Pandemic

Front Psychol. 2021 Jul 20:12:708537. doi: 10.3389/fpsyg.2021.708537. eCollection 2021.

Authors

Baozhen Jiang¹, Haojie Zhu², Jinhua Zhang¹, Cheng Yan¹, Rui Shen¹

Affiliations

¹ School of Economics, Zhejiang University of Technology, Zhejiang, China.
² School of Applied Science and Technology, Hainan University, Haikou, China.

Abstract

In this paper, we regard the Baidu index as an indicator of investors' attention to China's epidemic stocks. We believe that when seeking information to guide investment decisions, investor sentiment is usually affected by the information provided by the Baidu search engine, which may cause stock prices to fluctuate. Therefore, we constructed a GARCH extended model including the Baidu index to predict the return of epidemic stocks and compared it with the benchmark model. The empirical research in this paper finds that the forecast model including the Baidu index is significantly better than the benchmark model. This has important reference value both for investors in predicting stock trends and for the government's formulation of policies to prevent excessive stock market volatility.

Keywords: Baidu index; epidemic stocks; forecast; google trends; investor sentiment.