Global contagion of US COVID-19 panic news

• Published in: Emerging markets review 2024-03, Vol.59, p.101116, Article 101116
• Main Authors: Kang, Yong Joo, Park, Dojoon, Eom, Young Ho
• Format: Article
• Language: English
• Subjects: Contagion; COVID-19; Pandemic; Panic index; Sentiment
• ISSN: 1566-0141
• DOI: 10.1016/j.ememar.2024.101116

We investigate the contagion of US COVID-19 panic news, measured by the sentiment-based RavenPack US Panic Index, on the local stock market returns of 48 countries. Local stock market returns are found to be more significantly negatively associated with the US panic news than local panic news. Our results show that a 1% increase in the US Panic Index reduces local stock returns by 1.44%. The result holds for regional and subregional groupings and are robust to alternative measures of COVID-19 information. Furthermore, our contagion channel analysis shows that the differences of opinion channel is the key contagion transmission channel from the US to local markets. This alludes to the investor behavior contagion view, and not the fundamental contagion view, being the main driver of global contagion during the pandemic. •Investigation on the contagion effect of US COVID-19 panic news for 48 countries.•COVID-19 panic news is measured by the sentiment-based RavenPack Panic Index.•Local stock return is significantly negatively associated with the US Panic Index.•US rather than local panic news is more significantly associated with local returns.•Investor behavior was the main driver of global contagion transmission from the US.