PANDEMIC’S IMPACT ON BURSA MALAYSIA SECTORS: A COMPREHENSIVE STUDY UTILIZING OLSM AND ESM

Abstract

The pandemic has the potential to induce significant stock market volatility as a consequence of investor decisions, while movement restrictions may force the closure of many small-to-medium enterprises (SMEs). Despite this, there is a noticeable absence of comprehensive perspectives on the pandemic's impact across all sectors in Bursa Malaysia. Consequently, this paper endeavors to scrutinize the sector within Bursa Malaysia most profoundly affected by Covid-19. Employing the Ordinary Least Squares method (OLSM) method and the Event Study Method (ESM), the study compares stock returns and risks. The independent variables encompass daily counts of Covid-19 cases and deaths in three countries—Malaysia, the United States, and China—as well as the Brent oil price. The study focuses on 13 sectorial indices, including construction, consumer products, energy, finance, healthcare, industrial products, plantations, property, real estate investment trusts, technology, telecommunications and media, transportation and logistics, and utilities. Utilizing the ESM, the study investigates the daily average return, abnormal return, and expected return of each sector to gauge the impact of Covid-19. Historical data from March 18 to May 3 over three years (2019 to 2021) is employed. Results indicate that an increase in Covid-19 cases in Malaysia correlates with a decrease in the performance of these 13 sectors. Consequently, this study contributes to enhancing investor comprehension of sectorial indices' volatility and significance during the pandemic, aiding them in monitoring sectoral performance in the securities market.