Abstract
This paper studies the reaction of share prices in the Chilean securities market at the sectoral level to the arrival of COVID-19 in the country. The following question is answered: Did the Chilean market act efficiently before the arrival of COVID-19? To answer this question, an event study using a 10-day investment return window was applied to the industrial sectors that make up the IPSA (Selective Stock Price Index). To obtain the abnormal returns (AR) and cumulative abnormal returns (CAR) for the event window, three models were used: (1) adjusted average return, (2) adjusted market return, and (3) the market model. The results of the study show an overreaction to market losses, except in the utilities industry, causing greater losses after the event, which shows that information is slow to be incorporated in the previous stage and suggests that the prices of the assets do not reflect all the information available in the market. A significant finding is that the Chilean stock market responded inefficiently in the face of the arrival of the pandemic. This information is useful for investors in the formation of portfolios and/or investment strategies with a view to the long term.
Highlights
IntroductionIt has been observed that the volatility generated by the COVID-19 crisis has been greater in
The present work is based on the event study methodology proposed by Fama (1969), Binder (1998) and MacKinlay (1997), where the data include prices registered in the Santiago stock exchange, firms listed in the IPSA (Selective Stock Price Index)
COVID-19 Pandemic Timetable In Table 2 we present the important news that affected the movements of assets listed on the Chilean stock market
Summary
It has been observed that the volatility generated by the COVID-19 crisis has been greater in. The frequency and number of transactions on the stock market are lower, and, in general, large investments are focused on a few players, which can lead to market failures. This means that in the international context, the Chilean market has a low classification (Hassan and Kayser 2019). The objective of this study is to review the reaction of the industries that make up the index to the health crisis caused by COVID-19. Chile is a country where there are few studies of this type
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