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COVID-19 pandemic and stock market response: A culture effect.

ABSTRACT: National culture has been shown to impact the way investors, firm managers, and other financial market participants respond to crisis. To date, however, none has looked at the impact of culture on market responses to disasters. This paper is the first to address the effect of national culture on stock market responses to a global health disaster. We find larger declines and greater volatilities for stock markets in countries with lower individualism and higher uncertainty avoidance during the first three weeks after a country's first COVID-19 case announcement. Our results are robust after controlling for investor fear, cumulative infected cases, the stringency of government response policies, the level of democracy, political corruption, and the 2003 SARS experience, among others.

SUBMITTER: Fernandez-Perez A

PROVIDER: S-EPMC7831684 | biostudies-literature | 2021 Mar

REPOSITORIES: biostudies-literature

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COVID-19 pandemic and stock market response: A culture effect.

Fernandez-Perez Adrian A Gilbert Aaron A Indriawan Ivan I Nguyen Nhut H NH

Journal of behavioral and experimental finance 20201229

National culture has been shown to impact the way investors, firm managers, and other financial market participants respond to crisis. To date, however, none has looked at the impact of culture on market responses to disasters. This paper is the first to address the effect of national culture on stock market responses to a global health disaster. We find larger declines and greater volatilities for stock markets in countries with lower individualism and higher uncertainty avoidance during the fi ...[more]

PMID: 33520663

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