Investor Overreaction in Times of Health Crisis: Moroccan Stock Market Case
Downloads
In this article, we try to analyze and explain the causes of the overreaction of investors within the Moroccan stock market when a new crisis context emerges, while using a behavioral analysis approach based on the index of fear. To do this, we highlight several explanatory variables linked to COVID-19 pandemic that can lead investors to react irrationally in times of health crisis. The results show that the presence of the phenomenon of investor overreaction in the Moroccan stock market in this period is explained by fear. This feeling was caused by the uncertainties in the developed financial markets in connection with the spread of the coronavirus in the world.
Al-Awadhi, A. M., et Al. (2020). "Death and contagious infectious diseases: Impact of COVID-19 virus on stock market returns". Journal of Behavioral and Experimental Finance 27:100326. doi:10.1016/j.jbef.2020.100326.
Ali, M., Alam, N., & Rizvi, S. A. R. (2020). "Coronavirus (COVID-19) An epidemic or pandemic for financial markets". Journal of Behavioral and Experimental Finance, 27, 100341.
Alwathainani A. M., (2012), "Consistent winners and losers". International Review of Economics and Finance, 21, pp. 210-220.
Atkins A.B. and Dyle A., "Price Reversals, Bid Ask Spread, and Market Efficiency", Journal of Financial and Quantitative Analysis, (1990), 25, 4, pp. 535-547.
Baek, S., Mohanty, S. K., & Glambosky, M. (2020). "COVID-19 and stock market volatility: An industry level analysis". Finance Research Letters, 37, 101748.
Baker, S. R. et al. (2020) "The unprecedented stock market reaction to COVID-19", Review of Asset Pricing Studies, 10(4), pp. 742–758. doi: 10.1093/rapstu/raaa008.
Ball R., Kothari S. P., (1989), "Nonstationary expected returns: Implications for tests of market efficiency and serial correlation in returns". Journal of Financial Economics, 25, pp. 51–74.
Benmelech, E., & Tzur-Ilan, N. (2020). "The determinants of fiscal and monetary policies during COVID-19 crisis" (No. w27461). National Bureau of Economic Research.
Borgards, O., Czudaj, R. L., & Van Hoang, T. H. (2021). "Price overreactions in the commodity futures market: An intraday analysis of COVID-19 pandemic impact". Resources Policy, 71, 101966.
Boubaker, S., Farag, H. and Nguyen, D. K. (2015) "Short-term overreaction to specific events: Evidence from an emerging market", Research in International Business and Finance. Elsevier B.V., 35, pp. 153–165. doi: 10.1016/j.ribaf.2014.10.002.
Chan K. C., (1988), "On the contrarian investment strategy". Journal of Business, 61, pp. 147–163.
Capelle-Blancard, G. and Desroziers, A. (2020) "The Stock Market Is not the Economy? Insights from COVID-19 Crisis", SSRN Electronic Journal, 2020(May), pp. 1–40. doi: 10.2139/ssrn.3638208.
Chen, M. H., Jang, S. C., & Kim, W. G. (2007). "The impact of the SARS outbreak on Taiwanese hotel stock performance: An event-study approach". International Journal of Hospitality Management, 26(1), 200-212. https://doi.org/10.1016/j. ijhm.2005.11.004
CLEMENTS A., DREW M. E., REEDMAN E. M., VEERARAGHAVAN M., "The death of the overreaction anomaly? A multifactor explanation of the contrarian returns", Investment Management and Financial Innovations, volume 6, N°1, 2009, p. 76-85.
De Bondt, W. F., & Thaler, R. H. (1985) "Does the stock market overreact?" Journal of Finance, 40 :793?805, 1985.
De Bondt, W. F., & Thaler, R. H. (1987). "Further evidence on investor overreaction and stock market seasonality". The Journal of finance, 42(3), 557-581.
Fama E. F., (1965), "Random Walks in Stock Market Prices". Financial Analysts Journal, 21, 5, septembre/octobre, pp. 55–59.
Fama E.F. et Blume M.E. (1966), « Filter Rules and Stock Market Trading », Journal of Business, vol. 39, n° 1, Part II, p. 226-241.
Fama E. F., (1970), "Efficient Capital Markets: A Review of Theory and Empirical Work". Journal of Finance, 25, 2, pp. 383–417.
Fung, A.K. (1999) "Overreaction in the Hong Kong Stock Market", Global Finance Journal, 223-230.
Harjoto, M. A., et Al. (2020). “How do equity markets react to COVID-19? Evidence from emerging and developed countries”. Journal of Economics and Business, 105966.
Hamon J. et Jacquillat B. (1992), "Le marché français des actions - études empiriques", Paris : Presses Universitaires de France, 457, p.
Huang, J. and He, Y. (2020) "Analysis on the Psychology and Behavior of Individual Investors under the Influence of COVID-19", Proceedings of Business and Economic Studies, 3(5). doi: 10.26689/pbes.v3i5.1595.
Islam, S. M., S. Watanapalachaikul, et C. Clark. (2007). “Some Tests of the Efficiency of the Emerging Financial Markets: An Analysis of the Thai Stock Market.” Journal of Emerging Market Finance 6 (3): 291–302.
doi:10.1177/097265270700600304.
Jegadeesh, N. and Titman, S. (1993) "Returns to buying winners and selling losers: implication for stock market efficiency". Journal of Finance, 48 :65?91, 1993.
Khan, K. et al. (2020) "The impact of COVID-19 pandemic on stock markets: An empirical analysis of world major stock indices", Journal of Asian Finance, Economics and Business, 7(7), pp. 463–474. doi: 10.13106/jafeb.2020.vol7.no7.463.
Kwiatkowski, D., et Al. (1992). “Testing the Null Hypothesis of Stationarity against the Alternative of a Unit Root.” Journal of Econometrics 54 (1–3): 159–178.
Lehmann, B. (1990), "Fads, Martingales, and Market Efficiency", Quarterly Journal of Economics, 105-1, pp. 1–28.
Malkiel B. G., (2003), "The efficient market hypothesis and its critics". Journal of Economics Perspectives, 17, 1, pp. 59–82.
Mai H. M., (1995), "Sur-réaction sur le Marché Français des Actions au Règlement Mensuel 1977-1990". Finance, 16, pp. 113-136.
Mele, A., Obayashi, Y., & Shalen, C. (2015). "Rate fears gauges and the dynamics of fixed income and equity volatilities". Journal of Banking & Finance, 52, 256-265.
Moser C. & Yared P. (2020) "Pandemic Lockdown: The Role of Government Commitment" NBER Working Paper No. w27062
Òscar, Jordà, Sanjay R. Singh, Alan M. Taylo (2020) “Longer-run Economic Consequences of Pandemics.” NBER Working Paper No. w26934. https://www.nber.org/ papers/w26934
Ortmans, A., & Tripier, F. (2021). "Quand la BCE a-t-elle stoppé la contagion de la Covid-19 aux marchés financiers?". La Lettre du CEPII, (416).
Phan, D. H. B. and Narayan, P. K. (2020) "Country Responses and the Reaction of the Stock Market to COVID-19—a Preliminary Exposition", Emerging Markets Finance and Trade. Routledge, 56(10), pp. 2138–2150. doi: 10.1080/1540496X.2020.1784719.
Ramelli S. et Wagner A.F (2020) : "Feverish Stock Price Reactions to COVID-19", The Review of Corporate Finance Studies, Volume 9, Issue 3, November 2020, Pages 622–655,
Ru, H., Yang, E., & Zou, K. (2020). "Combating COVID-19 pandemic: The role of the SARS imprint". Available at SSRN 3569330.
Salisu, A. A., Akanni, L., & Raheem, I. (2020). "COVID-19 global fear index and the predictability of commodity price returns". Journal of Behavioral and Experimental Finance, 27, 100383.
Solnik, B. H. (1973). “Note on the validity of the random walk for European stock prices”. The journal of Finance, 28(5), 1151-1159.
Vasileiou, E. (2020) "Behavioral finance and market efficiency in the time of COVID-19 pandemic: does fear drive the market?", International Review of Applied Economics. Routledge, 00(00), pp. 1–18. doi: 10.1080/02692171.2020.1864301.
Vasileiou, E. et al. (2020) "Health risk and the efficient market hypothesis in the time of COVID-19", International Review of Applied Economics. Routledge, 00(00), pp. 1–14. doi: 10.1080/02692171.2020.1864299.
Zarowin P. (1990), "Size, Seasonality and Stock Market Overreaction", Journal of Financial and Quantitative Analysis, 25, 1, pp. 113-125.
Zhang, D., Hu, M. and Ji, Q. (2020) "Financial markets under the global pandemic of COVID-19", Finance Research Letters. Elsevier, 36(April), p. 101528. doi: 10.1016/j.frl.2020.101528.
