Trust and stock market volatility during the COVID-19 crisis

Nils Engelhardt; Miguel Krause; Daniel Neukirchen; Peter N Posch

doi:10.1016/j.frl.2020.101873

Trust and stock market volatility during the COVID-19 crisis

Financ Res Lett. 2021 Jan:38:101873. doi: 10.1016/j.frl.2020.101873. Epub 2020 Dec 1.

Authors

Nils Engelhardt¹, Miguel Krause¹, Daniel Neukirchen¹, Peter N Posch¹

Affiliation

¹ TU Dortmund University, Faculty of Business and Economics, Chair of Finance, Otto-Hahn-Str. 6, Dortmund 44227, Germany.

Abstract

We investigate if trust affects global stock market volatility during the COVID-19 pandemic. Using a sample of 47 national stock markets, we find the stock markets' volatility to be significantly lower in high-trust countries (in reaction to COVID-19 case announcements). Both trust in fellow citizens as well as in the countries' governments are of significant importance.

Keywords: COVID-19; Financial markets; Trust; Volatility.