Research finds connection between internet searches and equity prices

By James Langton | June 26, 2020 | Last updated on June 26, 2020
2 min read

Internet searches related to Covid-19 have impacted stock market prices, according to a new research paper from the Bank for International Settlements (BIS).

BIS researchers constructed a Covid-19 risk attitude (CRA) index for 61 markets based on internet searches in Google and Baidu for terms such as “Covid-19” and “coronavirus.”

The research found that the CRA index “does a good job at capturing investors’ attitudes toward pandemic-related risks.”

At the global level, searches began in mid-December and started increasing in mid-January, even though the number of cases was low in most countries at that point.

After the World Health Organization officially named the virus “Covid-19” on Feb. 11, “searches rose sharply until both terms reached about equal importance from mid-March onwards.”

“During the first months of the pandemic the CRA index foreshadowed the actual number of recorded infections globally. This indicates that for investors the economic effects of the pandemic are globally linked and are not confined to the areas directly affected by the virus,” the BIS report said.

The report also noted that traditional drivers of equity markets — such as oil prices, the value of the U.S. dollar and measures of risk aversion — didn’t fully explain the stock price activity during the market meltdown in early 2020.

Other factors, such as concerns captured by the CRA index, were also driving market activity.

“Results indicate that investors’ risk attitude as captured by internet searches played a significant role in most stock markets over and above what is explained by other more traditional drivers,” the report said.

The research found that internet searches for coronavirus and Covid-19 “correlate significantly with equity prices” in over 60% of the stock markets studied.

The impact was more pronounced in America and Europe than in other markets.

Additionally, the report found that stock markets are more sensitive to changes in their pandemic risk index in more financially developed economies, “whose markets are more integrated and efficient and have a broader investor base.”

Markets are less sensitive in jurisdictions that have imposed less severe restrictions on economic activity and adopted other sorts of containment measures against the pandemic.

Stock prices were also less sensitive to the CRA index in economies with a higher number of hospital beds per capita and higher government expenditure on health services as a share of GDP, the report noted.

On average, the BIS found that the CRA index explains an additional 6% of equity price variation.

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James Langton

James is a senior reporter for and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.