Unpacking the Crisis: Pandemic Impact Versus Panic Response in Global Equity Flows

Abstract

This paper examines the impact of the COVID-19 pandemic on international equity flows through two channels: direct pandemic effects and pandemic-induced panic. Using daily country-level equity flow data and real-time panic indicators, we find that psychological factors dominate biological concerns in driving capital movements. While government interventions effectively mitigate panic’s negative impact on equity flows in advanced economies, such policy responses do not influence equity flows in emerging economies. Our findings reveal the crucial role of early policy responses in stabilizing market sentiment during health crises and provide valuable insights for future crisis management strategies.

Keywords: Global Equity Flow，COVID-19 Pandemic，Pandemic-induced Panic, Government Intervention