COVID-Induced Investor Sentiments and Market Reaction under Extreme Meteorological Conditions: Evidence from Clean Energy Sector of Asia-Pacific

Farzan Yahya

farzan.yahya@yahoo.com
Department of Business Administration, Institute of Southern Punjab, 9-KM, Bosan Road, Khayab-e-Yusuf, Multan (Pakistan)
https://orcid.org/0000-0001-5666-1279

Zhang Shaohua


School of Economics & Statistics, Guangzhou University (China)

Muhammad Waqas


School of Management, Jiangsu University (China)

Zhengde Xiong


School of Business Administration, Hunan University, Changsha (China)

Abstract

The unprecedented global economic and social crisis caused by the coronavirus outbreak has not spared the energy sector. Using a dynamic model, we investigated the effect of COVID-19 cases on investor sentiments and stock returns of clean energy in the Asian-Pacific region. The results show that coronavirus cases negatively affect stock returns using investor sentiments as a transmission channel. We also find a negative effect of air pollution on stock returns. Since COVID-19 restricted trade and plummeted the oil prices, economies relied on non-renewable sources to meet energy demands. Nevertheless, the investor’s optimism and high sentiment level may deteriorate this link. On the other hand, we do not find any significant effect of low-high temperature on either investor sentiments or clean energy stock returns. Clean energy stocks were viewed as more sustainable and less vulnerable to external shocks, however, the fear and pessimism among investors induced by corona-virus are spilled over the renewable energy sector.


Keywords:

COVID-19, investor sentiments, air pollution, temperature, clean energy stocks

AKHTARUZZAMAN M., BOUBAKER S., SENSOY A., 2020, Financial contagion during COVID–19 crisis, in: Finance Research Letters, 101604.
  Google Scholar

AL-AWADHI A. M., AL-SAIFI K., AL-AWADHI A., ALHAMADI S., 2020, Death and contagious infectious diseases: Impact of the COVID-19 virus on stock market returns, in: Journal of Behavioral and Experimental Finance, 100326.
  Google Scholar

ALBULESCU C., 2020, Coronavirus and oil price crash, in: SSRN 3553452.
  Google Scholar

ALBUQUERQUE R., KOSKINEN Y., YANG S., ZHANG C., 2020, Resiliency of environmental and social stocks: an analysis of the exogenous COVID19 market crash, in: The Review of Corporate Finance Studies, cfaa011.
  Google Scholar

ALI M., ALAM N., RIZVI S. A. R., 2020, Coronavirus (COVID-19) – An epidemic or pandemic for financial markets, in: Journal of Behavioral and Experimental Finance, 100341.
  Google Scholar

ALONSO-BORREGO C., ARELLANO M., 1999. Symmetrically normalized instrumental-variable estimation using panel data, in: Journal of Business & Economic Statistics, 17(1), p. 36-49.
  Google Scholar

APERGIS N., GABRIELSEN A., SMALES L. A., 2016, (Unusual) weather and stock returns – I am not in the mood for mood: further evidence from international markets, in: Financial Markets and Portfolio Management, 30(1), p. 63-94.
  Google Scholar

ASHRAF B. N., 2020, Stock markets’ reaction to COVID-19: cases or fatalities?, in: Research in International Business and Finance, 101249.
  Google Scholar

BAKER M., WURGLER J., 2006, Investor sentiment and the cross‐section of stock returns, in: The journal of Finance, 61(4), p. 1645-1680.
  Google Scholar

BALTAGI B. H. (ed.), 2015, The Oxford handbook of panel data, Oxford Handbooks.
  Google Scholar

BI J., ZHU Y., 2020, Value at risk, cross-sectional returns and the role of investor sentiment, in: Journal of Empirical Finance, 56, p. 1-18.
  Google Scholar

BIROL F., 2020, The coronavirus crisis reminds us that electricity is more indispensable than ever, International Energy Agency.
  Google Scholar

BLUNDELL R., BOND S., 1998, Initial conditions and moment restrictions in dynamic panel data models, in: Journal of econometrics, 87(1), p. 115-143.
  Google Scholar

BOURDEAU-BRIEN M., KRYZANOWSKI L., 2017, The impact of natural disasters on the stock returns and volatilities of local firms, in: The Quarterly Review of Economics and Finance, 63, p. 259-270.
  Google Scholar

COHEN M. J., 2020, Does the COVID-19 outbreak mark the onset of a sustainable consumption transition?, in: Sustainability: Science, Practice and Policy, 16(1).
  Google Scholar

COIBION O., GORODNICHENKO Y., WEBER M., 2020, The Cost of the COVID-19 Crisis: Lockdowns, Macroeconomic Expectations, and Consumer Spending (No. w27141), National Bureau of Economic Research.
  Google Scholar

CROSS F., 1973, The behavior of stock prices on Fridays and Mondays, in: Financial analysts journal, 29(6), p. 67-69.
  Google Scholar

DEVI S., 2020, Travel restrictions hampering COVID-19 response, in: The Lancet, 395(10233), p. 1331-1332.
  Google Scholar

DING X., GUO M., YANG T., 2020, Air Pollution, Local Bias, and Stock Returns, in: Finance Research Letters, 101576.
  Google Scholar

DOWLING M., LUCEY B. M., 2008, Robust global mood influences in equity pricing, in: Journal of Multinational Financial Management, 18(2), p. 145-164.
  Google Scholar

FLOROS C., 2011, On the relationship between weather and stock market returns, in: Studies in Economics and Finance, 28(1), p. 5-13.
  Google Scholar

HENS T., RIEGE M. O., 2016, Financial economics: A concise introduction to classical and behavioral finance, Springer, New York.
  Google Scholar

ICHEV R., MARINC M., 2018, Stock prices and geographic proximity of information: Evidence from the Ebola outbreak, in: International Review of Financial Analysis, 56, p. 153-166.
  Google Scholar

IEA, 2020, Covid-19 impact on electricity, httpps://www.iea.org/reports/covid-19-impact-on-electricity, (1.09.2020).
  Google Scholar

KAMSTRA M. J., KRAMER L. A., LEVI M. D., 2000, Losing sleep at the market: The daylight saving anomaly, in: American Economic Review, 90(4), p. 1005-1011.
  Google Scholar

KANDA W., KIVIMAA P., 2020, What opportunities could the COVID-19 outbreak offer for sustainability transitions research on electricity and mobility?, in: Energy Research & Social Science, 68, 101666.
  Google Scholar

KAPLANSKI G., LEVY H., 2010, Sentiment and stock prices: The case of aviation disasters, in: Journal of Financial Economics, 95(2), p. 174-201.
  Google Scholar

LEPORI G. M., 2016, Air pollution and stock returns: Evidence from a natural experiment, in: Journal of Empirical Finance, 35, p. 25-42.
  Google Scholar

LI Q., PENG C. H., 2016, The stock market effect of air pollution: evidence from China, in: Applied Economics, 48(36), p. 3442-3461.
  Google Scholar

LIU H., MANZOOR A., WANG C., ZHANG L., MANZOOR Z., 2020, The COVID-19 Outbreak and Affected Countries Stock Markets Response, in: International Journal of Environmental Research and Public Health, 17(8), 2800.
  Google Scholar

MCGURK Z., NOWAK A., HALL J. C., 2020, Stock returns and investor sentiment: textual analysis and social media, in: Journal of Economics and Finance, 44, p. 458-485.
  Google Scholar

MYLENKA T., NOVYK B., 2020, Impact of Covid19 on the global energy sector, in: PV Magazine, https://www.pv-magazine.com/2020/04/24/impactof-covid-19-on-the-global-energy-sector/ (1.09.2020).
  Google Scholar

OMRI A., NGUYEN D. K., 2014, On the determinants of renewable energy consumption: International evidence, in: Energy, 72, p. 554-560.
  Google Scholar

PAPAKYRIAKOU P., SAKKAS A., TAOUSHIANIS Z., 2019, The impact of terrorist attacks in G7 countries on international stock markets and the role of investor sentiment, in: Journal of International Financial Markets, Institutions and Money, 61, p. 143-160.
  Google Scholar

QIANG Z., SHU-E, Y., 2009, Noise trading, investor sentiment volatility, and stock returns, in: Systems Engineering-Theory & Practice, 29(3), p. 40-47.
  Google Scholar

ROODMAN D., 2009, A note on the theme of too many instruments, in: Oxford Bulletin of Economics and statistics, 71(1), p. 135-158.
  Google Scholar

SEOK S. I., CHO H., RYU D., 2019, Firm-specific investor sentiment and daily stock returns, in: The North American Journal of Economics and Finance, 50, 100857.
  Google Scholar

SHEIKH M. F., SHAH S.Z.A., MAHMOOD S., 2017, Weather effects on stock returns and volatility in South Asian markets, in: Asia-Pacific Financial Markets, 24(2), p. 75-107.
  Google Scholar

SOHRABI C., ALSAFI Z., O’NEILL N., KHAN M., KERWAN A., AL-JABIR A., AGHA R., ET AL., 2020, World Health Organization declares global emergency: A review of the 2019 novel coronavirus (COVID-19), in: International Journal of Surgery, 76, p. 71-76.
  Google Scholar

WOOLDRIDGE J. M., 2010, Econometric analysis of cross section and panel data, MIT press.
  Google Scholar

WU Q., HAO Y., LU J., 2018, Air pollution, stock returns, and trading activities in China, Pacific-Basin Finance Journal, 51, p. 342-365.
  Google Scholar

YAHYA F., RAFIQ M., 2019, Unraveling the contemporary drivers of renewable energy consumption: Evidence from regime types, in: Environmental Progress & Sustainable Energy, 38(5), 13178.
  Google Scholar

YAHYA F., RAFIQ M., 2020, The Influence of Air Pollution and Clean Energy on Tuberculosis: The Moderating Role of Urbanization, in: Iranian Journal of Public Health, 49(6), p. 1106-1111.
  Google Scholar

YONGJIAN Z., JINGU X., FENGMING H., LIQING C., 2020, Association between short-term exposure to air pollution and COVID-19 infection: Evidence from China, in: Science of the total environment, 138704.
  Google Scholar

ZHANG D., HU M., JI Q., 2020, Financial markets under the global pandemic of COVID-19, in: Finance Research Letters, 101528.
  Google Scholar

Download


Published
2021-01-04

Cited by

Yahya, F., Shaohua, Z., Waqas, M., & Xiong, Z. (2021). COVID-Induced Investor Sentiments and Market Reaction under Extreme Meteorological Conditions: Evidence from Clean Energy Sector of Asia-Pacific. Problemy Ekorozwoju, 16(1), 7–15. https://doi.org/10.35784/pe.2021.1.01

Authors

Farzan Yahya 
farzan.yahya@yahoo.com
Department of Business Administration, Institute of Southern Punjab, 9-KM, Bosan Road, Khayab-e-Yusuf, Multan Pakistan
https://orcid.org/0000-0001-5666-1279

Authors

Zhang Shaohua 

School of Economics & Statistics, Guangzhou University China

Authors

Muhammad Waqas 

School of Management, Jiangsu University China

Authors

Zhengde Xiong 

School of Business Administration, Hunan University, Changsha China

Statistics

Abstract views: 37
PDF downloads: 12