Abstract
We study the effect of the first registered case of COVID-19 on stock market returns using event study analysis. Mean-adjusted returns and market model methods are used to estimate cumulative abnormal returns for 30 countries. The results show that stock market returns experience a downwards trend as well as significant negative returns following the COVID-19 outbreak.Keywords: COVID-19, event study, index returns; pandemicsJEL Classification: G14DOI: https://doi.org/10.32479/ijefi.9941
Highlights
Research identifies a strong link between stock market returns and key events such as political events (Podgorski, 2020; Wong and Hooy, 2020); geopolitical events (Schiereck et al, 2016; Tielmann and Schiereck, 2017); terrorist incidents (Bash and Alsaifi, 2019); environmental events (Pham et al, 2019); and disease outbreaks such as animal diseases, Ebola, SARS, and COVID-19 (Park et al 2008; Pendell and Cho, 2013; Chen et al, 2009; Chen et al, 2007; Ichev and Marinč, 2018; Al-Awadhi et al, 2020)
In December 2019, an infectious disease identified as coronavirus first appeared in Wuhan, the Capital of Hubei province in the People’s Republic of China (PRC) and since has spread rapidly across the globe
On 11 February 2020 the World Health Organization (WHO) announced that the new name for agent responsible for the coronavirus disease is COVID-19. (Centers for Disease Control & Prevention, 2020) On 11 March 2020 the WHO announced that COVID-19 is a global pandemic
Summary
Research identifies a strong link between stock market returns and key events such as political events (Podgorski, 2020; Wong and Hooy, 2020); geopolitical events (Schiereck et al, 2016; Tielmann and Schiereck, 2017); terrorist incidents (Bash and Alsaifi, 2019); environmental events (Pham et al, 2019); and disease outbreaks such as animal diseases, Ebola, SARS, and COVID-19 (Park et al 2008; Pendell and Cho, 2013; Chen et al, 2009; Chen et al, 2007; Ichev and Marinč, 2018; Al-Awadhi et al, 2020). The Dow Jones, S&P and NASDAQ declined 3.5%, 3.3% and 3.7%, respectively (BBC, 24 February 2020) This has led researchers to extensively investigate its effect on stock market returns. Al-Awadhi et al (2020) study the effect of COVID-19 on the Chinese stock market using panel data regression. This paper contributes to the literature on the relationship between COVID-19 and stock market returns by covering 30 markets, as well as treating the first registered case in each country as the event day.
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