Investor attention and the response of US stock market sectors to the COVID-19 crisis

Purpose: COVID-19 has had an immense impact on global stock markets, with no sector escaping its effects. Investor attention towards COVID-19 surged as the virus spread, the number of cases grew and its consequences imposed on everyday life. We assess whether this increase in investor attention may explain stock returns across different sectors during this unusual period. Design/methodology/approach: We adopt the methodology of Da et al. (2015), using Google search volume (GSV) as a proxy for investor attention to examine the relationship between investor attention and stock returns across 11 sectors. Findings: Our results demonstrate that heightened attention towards COVID-19 negatively influences US stock returns. However, relatively speaking, some sectors appear to have gained from the increased attention. This outperformance is centred in the sectors most likely to benefit (or likely to lose least) from the crisis and associated spending by households and government (i.e. consumer staples, healthcare and IT). Such results may be explained by an information discovery hypothesis in the sense that investors are searching online for information to enable a greater understanding of COVID-19's impact on relative stock sector performance. Originality/value: While we do not claim that investor attention is the only driver of stock returns during this unique period, we do provide evidence that it contributes to the market impact and to the heterogeneity of returns across stock market sectors.