The impact of social cohesion on stock market resilience: Evidence from COVID-19

Journal article

Ashraf, B. (2022). The impact of social cohesion on stock market resilience: Evidence from COVID-19. Journal of Behavioral and Experimental Finance. 36, p. 100749. https://doi.org/10.1016/j.jbef.2022.100749
AuthorsAshraf, B.
Abstract

We investigate whether cultural tightness, the strength of social norms, provides stock markets with resilience to external shocks. There is tension in forming expectations regarding this. One reasoning, particularly following from cultural archaeology literature, is that societies best cope with challenges, disaster recovery, and loss when they are culturally comfortable with transformation, with cultural tightness arguably opposed to cultural change. On the other hand, alternative reasoning is that tightness allows for societal cohesion that supports optimism to function in a unified way to confront challenge. We test whether markets were supported by cultural tightness during COVID-19 adversity. In accordance with the latter view, we evidence that stock market volatilities during COVID-19 were significantly lower in countries with ‘tighter’ cultures.

KeywordsCultural tightness looseness; Stock market; COVID-19
Year2022
JournalJournal of Behavioral and Experimental Finance
Journal citation36, p. 100749
PublisherElsevier
ISSN2214-6350
Digital Object Identifier (DOI)https://doi.org/10.1016/j.jbef.2022.100749
Web address (URL)https://www.sciencedirect.com/science/article/abs/pii/S2214635022000715
Publication dates
Print31 Dec 2022
Publication process dates
Accepted24 Aug 2022
Deposited01 Dec 2022
Accepted author manuscript
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Open
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