Ep. 03 - Investor sophistication and stock market behavior during COVID-19

This doctoral dissertation examines the causal impact of the announcement of the first COVID-19 case in Brazil on the national stock market. The author, Ricardo Ferreira Dantas, exploits an exogenous shock to investor sentiment to analyze variations in prices and trading volumes on B3 using high-frequency data.The study highlights that the reaction to pandemic-induced panic was asymmetric, varying according to the level of investor sophistication: institutional investors adopted defensive selling strategies, while less experienced individuals exhibited divergent behaviors. Beyond investor profiles, the research also investigates sectoral heterogeneity and how firm-specific characteristics—such as size and governance—either mitigated or amplified the effects of the crisis.The study contributes to the behavioral finance literature by demonstrating how intense emotions influence price formation in periods of extreme uncertainty.