The Effects of Pandemic Event on the Stock Exchange of Thailand

Kamphol Panyagometh

doi:10.3390/economies8040090

Abstract

The unprecedented global pandemic of COVID-19 has greatly impacted the stock market in terms of both price reactions and the influences of volatility. Using a sample of 46 stocks listed in the Stock Exchange of Thailand, in this paper, an event study technique is developed considering idiosyncratic volatility to analyze the reactions of stock prices and market volatility in Thailand during the period of the pandemic. The empirical results suggest that most securities in the Thai stock market have been adversely affected by the pandemic, as reflected in the abnormal returns compared to the period before the COVID-19 outbreak. This is mainly attributable to the curtailed economic activities induced by the pandemic as well as policy responses such as social distancing, quarantine and temporary market shutdown. Nevertheless, stocks in different sectors have been shown to have varied in terms of price responses, as some businesses may have benefitted from the pandemic. In terms of market volatility, the cumulated abnormal volatility (CAV) calculated in the paper suggests that volatility in the Stock Exchange of Thailand (SET) was significantly higher during the event window of COVID-19.

Highlights

The ongoing global pandemic of severe acute respiratory syndrome—known as COVID-19 or coronavirus disease 2019—has created unprecedented social and economic disruption around the globe
In this paper, we aim to investigate how the equity market is reacting to the specific event of the global spread of COVID-19 using the event study technique to empirically measure the abnormal returns and volatilities associated with this catastrophic event
The methodology used in the paper was based on the hypothesis of efficient markets suggested by Bromiley et al (1988) and Fama et al (1969), based on the hypothesis of efficient markets suggested by Bromiley et al (1988) and Fama et al (1969), which implies that as soon as new financially relevant information enters the market and is absorbed which impliesthe that as sooninformation as new financially relevant information enters the market and isinto absorbed by investors, relevant or market shocks will instantaneously be translated stock by investors, the relevant information or market shocks will instantaneously be translated into stock prices

Summary

Introduction

The ongoing global pandemic of severe acute respiratory syndrome—known as COVID-19 or coronavirus disease 2019—has created unprecedented social and economic disruption around the globe. In terms of health and epidemic concerns, more than 20.6 million cases of COVID-19 have been confirmed in 188 countries, resulting in more than 749,000 deaths as of 13 August. In this paper, we aim to investigate how the equity market is reacting to the specific event of the global spread of COVID-19 using the event study technique to empirically measure the abnormal returns and volatilities associated with this catastrophic event. The idiosyncratic price and volatility reactions across different stocks are captured in this study under the assumption that the impact of the pandemic would be asymmetric depending on the business sector of each stock; that is, regardless of the exogenous nature of the catastrophic event, stocks in the Thai equity market are expected to have uneven impacts in terms of excess returns and abnormal stock volatilities

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Conclusion