ABSTRACT
It has been increasingly common for the government to adopt non-market approaches to manage or interfere with the market during a stock market crisis. Taking Chinese government’s bailout of the market during the COVID-19 epidemic as the research object, this paper examines the impact of Chinese government’s direct bailout intervention on investors’ crisis psychology. The findings are as follows: (1) The government “buy-in” bailout effectively smooths investors’ crisis sentiment;(2) There is a downside of the government “buy-in” bailout, which compromises the market pricing effect and aggravates the herding effect;(3) For stocks not bought by the government, the government’s “verbal” intervention can relieve investors’ crisis sentiment in the short term;(4) Stocks with different characteristics are affected by the government’s “verbal” intervention to different degrees, with financial stocks and problematic stocks more susceptible to it.