The COVID-19 pandemic created unprecedented market uncertainty, providing a unique setting to study investor psychology. The crisis led investors to make emotional rather than rational decisions, reflected through behavioural biases such as loss aversion, overconfidence, and herding. This study examines these behavioural aspects among Indian investors in the post-COVID-19 period by combining market-based measures and Google Trends data as behavioural proxies. Furthermore, financial decision making often involves emotional biases that influence investor judgment and risk perception. Hence, this study explores how behavioural biases such as loss aversion, overconfidence, and herding varied across pre- and post-COVID-19 periods.

The objective is to determine whether the outbreak changed rational investor behaviour in the Indian market. The study relies on secondary data from the National Stock Exchange (NSE) and Google Trends for the period January 2019 to December 2021, covering both pre- and post-pandemic phases. Loss aversion is measured using weekly market returns of the Nifty indices to examine asymmetric reactions to gains and losses. Overconfidence is measured using Abnormal Trading Volume (ATV) derived from weekly market data of the Mid-Cap and Small-Cap indices. Herding behaviour is assessed using the Cross-Sectional Absolute Deviation (CSAD) approach, which identifies the degree to which individual stock returns move together rather than independently. The empirical analysis involves regression models to test the relationship between investor attention (Google search volume) and market behaviour (CSAD, ATV, and return asymmetry).

The study hypothesises that:

(H1) Investors show Imbalanced reaction to gains and losses, responding more strongly to losses than to gains of similar extend, indicating the presence of loss aversion.

(H2) An increase in ATV is positively associated with subsequent market volatility, indicating that higher ATV reflects overconfident trading behaviour among investors.

(H3) Cross-sectional dispersion in stock returns has reduced during periods of extreme market movements, indicating that investors tend to follow collective market behaviour rather than individual assessment.

The expected findings suggest that the health shock intensified behavioural biases, with investors showing heightened loss aversion, increased trading driven by overconfidence, and stronger herding tendencies during periods of market stress. The results are expected to provide insights into how investors panic or overreact during crises, offering implications for behavioural finance, market regulation, and investment strategy formulation. In conclusion, this research contributes to the broader field of behavioural finance by empirically examining how the COVID-19 pandemic influenced investor decision-making patterns in India through measurable behavioural proxies.