Abstract
This study examines the impact of COVID-19 on market sentiment and the stock market’s reaction at different investors’ time horizons in India. We applied wavelet coherence analysis and event study methodology during waves 1 and 2 of COVID-19 on NIFTY 50 firms. The results of this study report that market-related implicit sentiment proxies depicting the market’s bullish (bearish) sentiment negatively (positively) correlate with COVID-19 during the first wave of the pandemic in the short-term to medium-term (until 16 days). Using the event study method to compute abnormal stock returns during waves 1 and 2 of COVID-19, we found statistically significant negative abnormal returns during wave 1 only. Our findings extend the literature that examines the market reaction to COVID-19. The results generally hold for various robustness checks.
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