Journal of Theoretical and Applied Electronic Commerce Research (Jun 2023)

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

  • Jessica Paule-Vianez,
  • Carmen Orden-Cruz,
  • Raúl Gómez-Martínez,
  • Sandra Escamilla-Solano

DOI
https://doi.org/10.3390/jtaer18020058
Journal volume & issue
Vol. 18, no. 2
pp. 1142 – 1156

Abstract

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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.

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