COMPARING INVESTOR BEHAVIOR DURING AND AFTER PANDEMIC ERA: DOMINANTLY RATIONAL OR IRRATIONAL DRIVEN?

Abstract

This study is conducted to compare investors’ decision-making behavior between two periods, during pandemic and during recovery period in Indonesia. Our focus is on the rationality and irrationality factors that explained their decision-making. We examine the differences of the behavior between during the covid-19 pandemic and during the economic recovery era. This study is comparing the correlation of investors’ rationality factors and irrationality factors on stock market return between two periods, during pandemic and during recovery period. Using Spearman Rank Correlation analysis, we examine the correlation of each factors on stock market return. Our empirical results showed that rationality and irrationality factors correlated significantly with the stock return during the pandemic and during the economic recovery era. However, this study couldn’t find significant correlation each factor in each of situation separately, during pandemic period and during recovery period. The results contribute to the importance of reasons and emotions for stock-market returns. We believe this study is contributing various insights to many financial market’s stakeholders. The results of the study can help investors and traders to identify various factors affecting their trading during pandemic, support managers to make better investment decision making during uncertain situation, and support stock exchanges and regulators to make policy adjustment by considering irrational factors.