From fear to recovery: Investor sentiment, macroeconomic shocks, and tourism stock volatility in China

This research investigates the impact of investor sentiment and macroeconomic shocks on the volatility of China's tourism stocks during the COVID-19 recovery period, specifically from March 2020 to December 2022. By analyzing daily data from 20 publicly listed tourism companies using GARCH family models, the study distinguishes between a Crisis Phase (from March 2020 to February 2022) and a Recovery Phase (from March to December 2022). The findings indicate that during the Crisis Phase, investor sentiment and anxiety related to the pandemic heightened volatility, resulting in a 6.2 % contraction in tourism GDP. After March 2022, the impact of pandemic-related fears began to diminish. The analysis also reveals bidirectional volatility spillovers among different tourism subsectors, indicating that market sentiment plays a significant role in contributing to this volatility. The study highlights the importance of investor education and institutional reforms in mitigating herd behavior and stabilizing a key sector of China's economy. • We investigates investor sentiment influence on Chinese tourism stock market volatility. • daily data collected for 20 tourism stocks from March 2020 to December 2022. • The individual investor sentiment has substantially amplified volatility. • The fear index (FI), demonstrating that the pandemic is no longer being blamed for volatility.