Abstract
We study the impact of COVID‐19 on Chinese stock market which can be seen as a complex system. We use the event study method to evaluate its performance change in terms of the return rate, turnover rate, etc. We show that the abnormal return of stock market was significantly negative after the outbreak of COVID‐19 and did not turn positive until May 2020. Moreover, the five‐factor model is used to estimate the ordinary returns of different industries and show that abnormal returns for medical and food industries were significantly positive, while energy and public utility industries had significantly negative abnormal returns which persisted for a long time. COVID‐19 had lag effects on clothes industry, finance industry, transportation industry, and IT industry. We also find that energy and finance industries had negative abnormal turnover rates during the sample period, while other industries, such as healthcare and telecommunications service industries, had positive abnormal turnover rates.
Highlights
In 2020, COVID-19 swept the world, and the global capital market fluctuated violently. e Shanghai Composite dropped by 7.72% on February 3, 2020; the stock indexes of almost all countries, including USA, Canada, Brazil, South Korea, and the Philippines, plummeted in March 2020
The five-factor model is used to estimate the ordinary returns of different industries and show that abnormal returns for medical and food industries were significantly positive, while energy and public utility industries had significantly negative abnormal returns which persisted for a long time
We find that energy and finance industries had negative abnormal turnover rates during the sample period, while other industries, such as healthcare and telecommunications service industries, had positive abnormal turnover rates
Summary
In 2020, COVID-19 swept the world, and the global capital market fluctuated violently. e Shanghai Composite dropped by 7.72% on February 3, 2020; the stock indexes of almost all countries, including USA, Canada, Brazil, South Korea, and the Philippines, plummeted in March 2020. E aim of this work is to study the impact of COVID-19 on China’s A-stock; we use event study to investigate the abnormal return and turnover rate for different industries in the long run and short run. For example, those by Ali et al [9], Dai et al [13], Liu et al [14], Mezghani et al [15], and Nguyen et al [16], explore the impact of COVID-19 on the Chinese stock market, we put emphasis on the abnormal return of the whole market via the OLS model; compared with existing works, for example, Liu et al [17], we study the Complexity impact of COVID-19 on the return of different industries by using a five-factor model [18]. E contribution of our work is twofold It extends the literature about the impact of COVID-19 on emerging market; second, it uses a five-factor model to study the abnormal return of different industries and examine the change of turnover rates.
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