Impact of Public Health Events on Aviation Stock Returns and Volatility: Evidence from COVID-19

Abstract

The aviation industry was greatly impacted during COVID-19 since 2020. At the end of 2022, the epidemic was basically under control. In the post-epidemic era, the prevention and control policies were relaxed. The aviation industry gradually recovered. These events led to great influence to aviation stocks. To examine the influence of the pandemic on aviation stocks, the event study method and the GARCH model are adopted analysing the return and its volatility. The result indicates that the outbreak of the coronavirus brought about a detrimental impact on aviation stocks. During the epidemic, negative news had a greater impact than positive news, while in the period before the COVID-19 positive news exerted greater impact. Moreover, both persistence and long-term memory of the fluctuation decreased during the pandemic. The come of the post-epidemic era had a favourable influence on aviation stocks. Nevertheless, the effects of both events were relatively transient. These results help to guide aviation stock investment during public health events.