The stock market reaction to COVID-19 vaccination in ASEAN

Abstract

Previous studies have shown that the confirmed cases drive investor sentiment, reflecting the stock's return. Based on this, the vaccination growth is also expected to drive the investor’s sentiment, which can be reflected in the return of the stock market in ASEAN. Therefore, this study explores the vaccination impact on stock returns in ASEAN countries. This study contributes to the gap of taking the COVID-19 vaccination impact to the stock return into account by using the panel regression model with HC and Driscoll and Kraay robust covariance matrix estimator, which addresses the cross-dependency and heterogeneity problems. This study is one of the early studies of the topic, especially in ASEAN. The panel regression model with HC and Driscoll and Kraay robust covariance matrix estimator uses three variables: the daily stocks return, vaccine growth, and cases growth. It is a balanced panel data that includes six countries and 117 daily series data, making 702 observations used in the study. The results show conflicting results where daily vaccination growth negatively affects the stock return. This problem can arise for several reasons, such as the uncertainty in the financial market and cross-dependency and heterogeneity detected in the model. We can see that the investors still have a negative sentiment because COVID-19 has resulted in uncertainty on the financial market in ASEAN. This gives us practical implications that the ASEAN country members’ government needs to push vaccination policy more aggressively.