Abstract
Past studies have found that financial news has a relationship with stock prices. Bad news has negative impact on stock prices, but the type of bad news also matters. When a stock is shocked by a natural disaster, a dip of its stock price is only temporary; when it is shocked by a scandal event, such dip can be permanent and severe. Depending on the type of news, investors have different trading strategies; they may choose to hold the stocks that are shocked by a natural disaster and sell the stocks that are shocked by a scandal event. This paper focuses on the impacts of Luckin Coffee’s scandal event on April 2020 and the outbreak of COVID-19 on March on its stock price, its top competitor Starbucks’ stock price, and on the Nasdaq index. I collected stock prices of Luckin Coffee, Starbucks, and Nasdaq index from Yahoo! Finance from July 2019 to July 2020. By using regression analysis, the result shows that though the scandal event affected Luckin Coffee’s stock price severely, causing it to be in an irreversible situation, the impacts on Starbucks and Nasdaq are limited; the dip shown in Starbucks and Nasdaq on March is just due to the hit by the global pandemic, COVID-19.
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