Fear of COVID-19 Effect on Stock Markets: A Proposal for an Algorithmic Trading System Based on Fear

• Jessica Paule-Vianez ^[1]
  1. [1] Rey Juan Carlos University
• Localización: Journal of Theoretical and Applied Electronic Commerce Research, ISSN-e 0718-1876, Vol. 18, Nº. 2, 2023, págs. 1142-1156
• Idioma: inglés
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• Resumen

  • This study analyzes the fear of COVID-19 effect on European stock market returns. For this purpose, the search volumes (SV) collected by Google Trends (GT) and Wikipedia were used as proxies of fear of COVID-19. In a sample from 13 European stock markets, fear of COVID-19 was found to be associated with negative European stock returns. Our research employed this observation to propose an algorithmic trading system based on fear of COVID-19. Back-testing results show the possibility of extraordinary returns based on this system. These findings have important implications for political authorities, the mass media, and investors.