Determinants of Qualified Investor Sentiment during the COVID-19 Pandemic in North America, Asia, and Europe

Abstract

This work delineates the factors determining investor sentiment in specific regions during the pandemic and the influence of attitudes towards vaccination. The findings show that the reactions of knowledgeable investors in different regions to the economic effects of the pandemic were not uniform but depended on a variety of individual factors. Risk perception varied widely due to idiosyncrasies in specific countries and regions, the level of pandemic information, reaction to case reports and deaths, attitudes towards vaccination, lockdown compliance, and government measures to support businesses. These various elements combined to create different outlooks in the minds of investors that strongly influenced their investment strategies. For this investigation, we tested three estimation models: the classic robust standard error for time series regression, the new robust standard errors regression, and the Prais robust estimation. This study applied the lasso system of machine learning to select relevant explanatory variables. The novelty of our work resides in its analysis of the conduct of informed investors, using a reliable proxy, and the discussion of how government policies and different pandemic-related factors, specifically the vaccination status, affected investor sentiment in different regions. As for practical implications, an understanding of how the various economic factors related to the pandemic influenced the behavior of qualified investors in different regions can help regulators, government leaders, fund managers, and investors deal with a future virus outbreak.

Keywords

• COVID-19
• qualified investor
• investor sentiment
• VIX
• VSTOXX
• implied volatility