Starts and refutations of the Covid-19 rumors: Evidence from the reaction of the stock market
By manually collecting data on Internet-based rumors concerning COVID-19, we investigate the market reactions to the spread of such rumors and the government’s refutation of them. We find that frightening (reassuring) rumors have a negative (positive) impact on investors. The refutation of frighteni...
| Published in: | China Journal of Accounting Research |
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| Main Authors: | , , , |
| Format: | Article |
| Language: | English |
| Published: |
Elsevier
2022-12-01
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| Subjects: | |
| Online Access: | http://www.sciencedirect.com/science/article/pii/S1755309122000521 |
| Summary: | By manually collecting data on Internet-based rumors concerning COVID-19, we investigate the market reactions to the spread of such rumors and the government’s refutation of them. We find that frightening (reassuring) rumors have a negative (positive) impact on investors. The refutation of frightening rumors triggers a positive market response, whereas the refutation of reassuring rumors does not cause a significant market reaction. Further analysis shows that there is a stock price drift when frightening rumors are refuted by governments. Our conclusions remain robust after considering endogeneity. Our findings support the notion that epidemic-related rumors affect investors’ decisions, which add to literatures of the market responses of companies in the context of the COVID-19 pandemic and provide incremental evidence for the “the spiral of silence” theory. |
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| ISSN: | 1755-3091 |