Explaining Stock Markets' Performance during the COVID-19 Crisis : Could Google Searches Be a Significant Behavioral Indicator?

The purpose of this study is to examine the impact of the pandemic on the performance of stock markets, focusing on the behavioral influence of the fear due to COVID-19. Using a data set of 10 developed countries during the period December 31, 2019, to September 30, 2020, we examine the impact of COVID-19 on the performance of the stock markets. We incorporate the impact of the COVID-19 pandemic using the following variables: (a) the number of new COVID-19 cases, which was widely used as the main explanatory variable for market performance in early financial studies, and (b) a Google Search index, which collects the number of Google searches related to COVID-19 and incorporates the health risk and the fear of COVID-19 (the higher the number of searches for Covid terms, the higher the index value, and the higher the fear index). We employ our input into an EGARCH(1,1,1) model, and the findings show that the Google Search index enables us to draw statistically significant information regarding the impact of the COVID-19 fear on the performance of the stock markets. On the other hand, the variable of the number of new COVID-19 cases does not have any statistically significant influence on the performance of the stock markets. Google searches could be a useful tool for supporters of behavioral finance, scholars, and practitioners