Abstract:
The world economies were affected tremendously by the pandemic outbreak. The pandemic indicators are reflected in the financial markets by depression, anxiety and stress among investors. The objective of this dissertation is to investigate the asymmetric impact of COVID-19 on investor sentiments in Bahrain over the period 24th February 2020 to 25th March 2021. This study used a Non-Linear Autoregressive Distribution Lag (NARDL) that depends upon positive and negative partial sum decompositions of the coronavirus indicators. Interestingly, the empirical results show that new cases have more impact over new deaths. Dynamic multiplier further confirms that there is an inverse relationship between the COVID-19 indicator and the investor sentiments. The findings corroborate with the behavioral finance theory, it states that the pessimistic investors’ sentiments are more likely to be affected by bad news within the economy.

Keywords: Optimistic, Pessimistic, Investor Sentiments, COVID-19 Pandemic, NARDL.