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COVID-19 pandemic sentiment and stock market behavior: evidence from an emerging market

Byomakesh Debata (Department of Economics and Finance, BITS Pilani, Pilani Campus, Pilani, India)
Kshitish Ghate (Department of Economics, BITS Pilani, K K Birla Goa Campus, Zuarinagar, India)
Jayashree Renganathan (Department of Economics, BITS Pilani, K K Birla Goa Campus, Zuarinagar, India)

Review of Behavioral Finance

ISSN: 1940-5979

Article publication date: 22 November 2021

Issue publication date: 14 March 2023




This study aims to examine the relationship between pandemic sentiment (PS) and stock market returns in an emerging order-driven stock market like India.


This study uses nonlinear causality and wavelet coherence techniques to analyze the sentiment-returns nexus. The analysis is conducted on the full sample period from January to December 2020 and further extended to two subperiods from January to June and July to December to investigate whether the associations between sentiment and market returns persist even several months after the outbreak.


This study constructs two novel measures of PS: one using Google Search Volume Intensity and the other using Textual Analysis of newspaper headlines. The empirical findings suggest a high degree of interrelationship between PS and stock returns in all time-frequency domains across the full sample period. This interrelationship is found to be further heightened during the initial months of the crisis but reduces significantly during the later months. This could be because a considerable amount of uncertainty regarding the crisis is already accounted for and priced into the markets in the initial months.


The ongoing coronavirus pandemic has resulted in sharp volatility and frequent crashes in the global equity indices. This study is an endeavor to shed light on the ongoing debate on the COVID-19 pandemic, investors’ sentiment and stock market behavior.



Availability of data and material: The sources of data and materials have been given. Data can also be obtained upon request from the authors.

Competing interests: The authors declare no competing interest.

Funding: The research has not received funding from any agency.

Authors’ contributions: (1) Byomakesh Debata, CRediT roles: Conceptualization; Formal analysis; Investigation; Methodology; Software; Project administration; Validation; Visualization; Writing – original draft; Writing – review and editing. (2) Kshitish Ghate, CRediT roles: Conceptualization; Data curation; Visualization; Software; Writing – review and editing. (3) Jayashree Renganathan, CRediT roles: Data curation; Software; Formal analysis; Methodology; Writing – review and editing.


Debata, B., Ghate, K. and Renganathan, J. (2023), "COVID-19 pandemic sentiment and stock market behavior: evidence from an emerging market", Review of Behavioral Finance, Vol. 15 No. 2, pp. 176-204.



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