Impact of Investor Behavior on Stock Returns during COVID-19: A Systematic Review of Global Academic Papers

Abstract

The COVID-19 epidemic has had a big impact on the world's financial markets and economy, inducing considerable volatility in stock markets as countries faced unprecedented challenges. This systematic review amalgamates findings from recent academic papers to scrutinize the nexus between investor behavior and stock returns during the pandemic across various global markets, including the USA, UK, China, and Southeast Asian regions. The analysis reveals that investor behavior during the pandemic was largely characterized by heightened traditional behavioral biases such as overconfidence and herding. Moreover, a notable trend was the regional variation in investor responses, influenced significantly by local factors and sentiments. The pandemic period witnessed a surge in herding behavior, especially in bullish markets in the USA and UK, and a negative correlation between Chinese, Japanese, and US markets for stocks and investor psychology. This review serves as a reservoir of critical insights for investors, market regulators, and policymakers, facilitating a deeper understanding of market dynamics during global crises and aiding in the formulation of robust strategies for future challenges.