Diverse investor reactions to the COVID-19 Pandemic: insights from an emerging market

Suman Neupane, Zhebin Fan, Daniel Yanes Sanchez, Biwesh Neupane

Research output: Contribution to journalArticlepeer-review

2 Citations (Scopus)
34 Downloads (Pure)

Abstract

We examine the reaction of different investor categories to the COVID-19 pandemic in the Indian market throughout 2020. Using quarterly ownership data, we find significant differences across various investor categories during the crisis and post-crisis periods. We find that domestic institutional investors (DIIs) exhibit 'flight-to-quality' behavior, foreign institutional investors (FIIs) exhibit 'fire-sale' behavior, and retail investors (RIs) act as informed investors who provide liquidity during the crisis period. We observe conservative behavior from DIIs and FIIs throughout 2020, during which RIs initially increase their holdings in high-risk stocks but move to high-quality stocks in the final quarter of 2020. FIIs contribute the most to lower stock returns and higher volatility during the crisis period. Using daily FII trade-level data, we find that long-term FIIs start buying high-quality stocks before other categories in the post-crisis period, with short-term FIIs driving returns and volatility during the crisis period.
Original languageEnglish
Article number102000
Number of pages24
JournalJournal of International Financial Markets Institutions and Money
Volume93
Early online date14 Apr 2024
DOIs
Publication statusPublished - 30 Jun 2024

Keywords

  • covid-19
  • crises
  • institutional investors
  • foreign institutional investors
  • retail investors
  • investor horizon
  • emerging market

Fingerprint

Dive into the research topics of 'Diverse investor reactions to the COVID-19 Pandemic: insights from an emerging market'. Together they form a unique fingerprint.

Cite this