Influence of COVID-19 related media and news on the stock and crypto markets

Abstract

The entire world was significantly impacted by the COVID-19 pandemic,leading to confusion and turbulence in healthcare systems, as well as toextreme uncertainty in the financial realm. There was a profound distressin stock markets due to the enormously elevated levels of risk instigated bythe pandemic, which additionally inflated investors’ losses. The contagionwas supplemented by a surge of false stories that appear to be news (“fakenews”) that circulated throughout all media channels, thus additionally amplifyinguncertainty. This paper expands the previous literature by investigatingmedia impact on prominent indices of the stock and cryptocurrencymarkets. RavenPack Panic and Fake News indices were utilized to examinetheir influence on S&P 500 and crypto (Royalton CRIX) indices’ dailymovements by employing OLS and quantile regression. The results exhibitthat there are noteworthy dependencies over the conditional distribution,but they present only a small influence on observed indices. Fake news influencesthe cryptocurrencies’ daily movements in a bearish market, howeverthe effect is very weak. Furthermore, media-induced panic is significant inboth exceptionally bearish and bullish conditions considering S&P 500 dailyreturns, but is also exhibiting low impact.