Abstract
Unlike past health crises that were more localized, the highly contagious coronavirus disease 2019 (COVID-19) crisis is impacting the world to an unprecedented extent. This is the first study examining how and whether the COVID-19 pandemic affects herding behavior in the Eastern European stock markets. Using samples from the stock markets of Russia, Poland, the Czech Republic, Hungary, Croatia, and Slovenia from January 1, 2010 to March 10, 2021, we demonstrate that the COVID-19 pandemic has increased herding behavior in all the sample stock markets. Our results show that the COVID-19 crisis reinforces the impact of global market returns on herding behavior in these specific stock markets. We find that COVID-19 strengthens the spillover effect of regional herding on herding behavior. Thus, financial authorities should monitor investors in the stock market to avoid the increase in herding behavior as well as the reinforcement of the global market returns and regional return dispersion on herding during the period of pandemic.
Highlights
The highly contagious coronavirus disease 2019 (COVID-19) pandemic first occurred in Wuhan, China in December 2019 and spread rapidly worldwide
This study first examines whether the COVID-19 pandemic influences herding behavior in Eastern European stock markets
Using the samples of the stock prices of firms listed on MOEX (Russia), WIG 30 (Poland), PX (Czech Republic), Budapest SE (Hungary), CROBEX (Croatia), and Blue-Chip SBITOP (Slovenia) from January 1, 2010 to March 10, 2021, we demonstrate that the COVID-19 pandemic raises herding behavior in all Eastern European stock markets
Summary
The highly contagious coronavirus disease 2019 (COVID-19) pandemic first occurred in Wuhan, China in December 2019 and spread rapidly worldwide. By February 18, 2021, 1.1 billion people in 218 countries were infected with the virus. There have been 2.44 million deaths globally and over 80 million recovered patients. In Eastern Europe, the first confirmed case appeared in Russia on January 31, 2020, and subsequent related cases gradually appeared and spread to other countries such as Croatia on February 25, 2020, Czech Republic on March 1, 2020, Poland and Hungary on March 4, 2020, and Slovenia on March 5, 2020 (see Table 1). The influence of COVID-19 is an unprecedented global disaster, different from the previous pandemic events that were more localized. The virus is resilient and is expected to produce a long-term destructive impact on world health and the economy
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