Performance of the Chinese Stock Market against the Backdrop of the COVID-19 Pandemic—Based on Baidu Index

Abstract

As of the end of 2022, there were approximately 9. 3 million confirmed cases of COVID-19 in China. The epidemic has brought direct negative impacts to the Chinese economy from both the demand and supply sides. Given the enormous impact of COVID-19, it is important to explore the performance of the Chinese stock market under the background of the epidemic. As an indicator of the national economy, the stock market has always been of interest to scholars. However, there has been limited research from the perspective of behavior finance that focuses on the impact of the psychological fear caused by the COVID-19 pandemic. Using the Baidu daily search index between February 24, 2020 and November 17, 2022 as a proxy variable for measuring investor fear, the daily return of the Shanghai Composite Index is used to describe the performance of the stock market. The results show that investors' fear of the epidemic significantly affects the performance of the stock market in a negative way. The Baidu index, as an internet tool, can be widely used in behavioral finance to establish more accurate models.