COVID-19 Outbreak and Sectoral Performance of the Australian Stock Market: An Event Study Analysis

Abstract

The outbreak of COVID-19 has weakened the economy of Australia and its capital market since early 2020. The overall stock market has declined. However, some sectors become highly vulnerable while others continue to perform well even in the crisis period. Given this new reality, we seek to investigate the initial volatility and the sectoral return. In this study, we analyse data for eight sectors such as, transportation, pharmaceuticals, healthcare, energy, food, real estate, telecommunications and technology of the Australian stock market. In doing so, we obtain data from Australian Securities Exchange (ASX) and analysed them based on `Event Study' method. Here, we use the 10-days window for the event of official announcement of the COVID-19 outbreak in Australia on 27 February, 2020. The findings of the study show that on the day of announcement, the indices for food, pharmaceuticals and healthcare exhibit impressive positive returns. Following the announcement, the telecommunications, pharmaceuticals and healthcare sectors exhibit good performance, while poor performance is demonstrated by the transportation industry. The findings are vital for investors, market participants, companies, private and public policymakers and governments to develop recovery action plans for vulnerable sectors and enable investors to regain their confidence to make better investment decisions.

The resilience of green firms in the twirl of COVID‐19: Evidence from S&P500 Carbon Efficiency Index with a Fourier approach

“…On the other hand, some researchers concluded that stocks in the manufacturing, information technology, education and healthcare industries were more resistant to the pandemic. Alam et al (2020) examined the sectoral effects of COVID‐19 on the Australian stock exchange. According to that study, while telecommunication, technology, food, medicine and health services indices generated positive returns against the pandemic, energy, real estate and transportation indices generated negative returns.…”

Asian perspective of capital market performance amid the COVID 19 pandemic

“…To the best of the researcher's knowledge, COVID 19 has been extensively studied at the industry and business levels in a particular nation in recent studies such as Xiong et al (2020), Alam et al (2021), He et al (2020a) and In et al (2002). Other studies have focused on the major capital markets in the USA and EU regions such as He et al (2020c), Li et al (2021) and Harjoto et al (2021), however, a very negligible number of studies such as Hunjra et al (2021) and Mishra and Mishra (2021) have examined the major Asian equity markets reactions to COVID 19 using an event study while considering the first local detection announcement as the event date.…”

“…3.2 Event study framework 3.2.1 Event selection. In this study, the COVID 19 relevant events are identified in Table 2 where the first local detection of COVID 19 infection as per the WHO situation reports in 12 Asian countries was considered as the event date like Alam et al (2021), Adnan et al (2020) and Sayed and Eledum (2021) applied first detection as event day to measure capital market reaction, however these studies focuses on single market, whereas this study analyzes 12 different markets with nine different event dates which might show different dimension. Moreover, prior studies like Choudhary and Singhal (2020), Pattnaik and Gahan (2018) and Stevanius and Sukamulja( 2020) examined Asian capital market co-integration found either mild or negative co-integration, therefore multiple capital market reaction with uniform event date will not reflect the actual aggregate market behavior.…”

Modeling the impact of the COVID‐19 outbreak on environment, health sector and energy market

“…Furthermore, in the short run, new COVID‐19 death cases have a positive impact on the Refinitiv Global Healthcare Price Return Index and the Refinitiv Global Pharmaceuticals & Medical Research Price Return Index, as argued by Gurrib (2021); Harjoto and Rossi (2021); He et al (2020); Mazur et al (2021); Mushafiq (2021). Likewise, according to Alam et al (2021), the positive influence is asserted by rising demand for medical devices and pharmaceutics.…”