Abstract
This study focuses on the impact of COVID-19 on the stock market in the Asian region, highlighting the impact on stock returns of 15 Asian stock markets while observing the nexus between COVID-19 confirmed cases and stock return. The analysis is based on daily closing price indices of selected 15 markets during the period of 1st January 2019 and 30th June 2020. The Event Study method was employed to examine the impact of COVID-19 on stock returns, by comparing the calculated abnormal return before and after the event day (20th of January 2020) under two event windows such as (0,10) and (10, 20). Fixed Effect Panel Regression Analysis was applied to observe the impact of the number of COVID-19 confirmed cases on stock return in selected stock markets. The analysis reveals that abnormal returns after the event day were negative and therefore it is apparent that the COVID-19 outbreak has drastically affected the stock returns of selected stock markets of the Asian region. Specifically, two event windows indicate that COVID-19 has an immediate negative impact on all selected stock markets while the long-term negative impact has limited only to the emerging and frontier markets. It is observed that COVID-19 confirmed cases negatively affect the stock return of all selected stock markets in the Asian region.
Highlights
Stock markets are highly sensitive to both external and internal shocks, and the sensitiveness of stock markets is more substantial with the global emergency announced due to the current COVID-19 outbreak
The impact of COVID19 on stock returns was analysed using the Event Study method. 20th of January, 2020 was considered as the event day as international media announced the wide spread of COVID-19 on 20th of January, 2020
Apart from that, fixed effect panel regression analysis was carried out to observe the impact of the number of COVID-19 confirmed cases on stock return in selected stock markets
Summary
Stock markets are highly sensitive to both external and internal shocks, and the sensitiveness of stock markets is more substantial with the global emergency announced due to the current COVID-19 outbreak. Globalization has steadily increased the capital flows across the borders expanding the role of the stock markets. Asian companies accounted for 51% out of all initial capital earned by offering Initial Public Offerings (IPOs) in 2018. The increased intervention of public equity financing by Asian companies leads to expand the role of Asian stock markets in global equity financing. As figure 01 illustrates, the share of capital owned by Asian markets has sharply increased during the last two decades. Capital owned by Asian markets has increased from 19% (2000-2002) to 42% by 2016-2018 while the capital raised by Europe and United States markets has considerably declined (Figure 1)
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