Investor Sentiment and Stock Returns During the COVID-19 Pandemic

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.