Investor Attention towards coronavirus and response of Stock and Sovereign Credit Default Swaps Markets

We use search queries with the word “CORONAVIRUS” in Google Trends as a proxy for investors’ attention and track its impact on the stock markets and sovereign risk. By using daily data of 41 countries for the period of January-June 2020, it is found that increased coronavirus related search is negatively linked with stock market returns and positively linked with country risk. Further, stock market returns are depressed, and sovereign risk is higher in developed countries than emerging countries in response to rising concern about the spread of COVID-19.