COVID–19's Impact on Stock Prices Across Different Sectors—An Event Study Based on the Chinese Stock Market

He, Pinglin; Sun, Yulong; Zhang, Ying; Li, Tao

doi:10.4324/9781003214687-6

Cited by 48 publications

(79 citation statements)

References 17 publications

(18 reference statements)

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“…For every increase in the growth of the total number of corona cases, the market returns in financially freer countries are correlated with a smaller decrease in return. In regard to the developing economies, we notice that He et al (2020), Liu et al (2020) and Wu et al (2020) investigated the performance of stock markets in times of pandemic. Recent literature is also replete with studies that examine the economic and financial effects of coronavirus from different dimensions.…”

Section: Literature Reviewmentioning

confidence: 99%

“…The outbreak has affected the global financial market in an unprecedented way. There have been varied responses of the international stock market to the pandemic (Al-Awadhiet, 2020; He et al , 2020; Anh and Gan, 2020; Nguyen et al , 2021). Extant literature demonstrates two crucial channels through which the pandemic affects the stock market performance.…”

Section: Introductionmentioning

confidence: 99%

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Effects of the COVID-19 pandemic on stock market returns and volatilities: evidence from selected emerging economies

Rakshit

Neog

2021

SEF

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Purpose The purpose of this paper is to investigate the effects of exchange rate volatility, oil price return and COVID-19 cases on the stock market returns and volatility for selected emerging market economies. Additionally, this study compares the market performance in the emerging economies during the COVID-19 pandemic with the pre-COVID and global financial crisis (GFC) period. Design/methodology/approach The authors apply the arbitrage pricing theory to model the risk-return relationship between the risk-based factors (exchange rate volatility and COVID-19 cases) and stock market returns. By applying the exponential generalized autoregressive conditional heteroskedasticity model, the study captures the asymmetric volatility spillover from the stock markets to foreign exchange markets and vice versa. Findings Findings reveal that exchange rate volatility exerts a negative and significant effect on the market returns in Brazil (BOVESPA), Chile (S&P CLX IPSA), India (SENSEX), Mexico (S&P BMV IPC) and Russia (MOEX) during the coronavirus pandemic. Regarding the effect of oil price returns, the authors find a positive relationship between oil price and stock market returns across all the economies in the study. The market returns of Russia, India, Brazil and Peru appeared more volatile during the pandemic than the GFC period. Practical implications As the exchange rate volatility is causing higher risk and uncertainty in the stock market’s performance, the central bank’s effort to maintain a stabilizing effect on the exchange rate sale can be proven crucial for the economies under consideration. Emphasized should also be given to boost investors’ confidence in the stock market, and for this, the government policy actions in reducing the transmission of the disease are the need of the hour. Originality/value While a large volume of literature on stock market performance in times of COVID-19 has emerged from developed economies, this study adds to the literature by exploring the emerging economies’ stock market performance during the COVID-19 pandemic. Unlike previous literature, this study examines the volatility spillover between stock and exchange rate markets in the worst affected emerging economies during the crisis.

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Section: Literature Reviewmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Effects of the COVID-19 pandemic on stock market returns and volatilities: evidence from selected emerging economies

Rakshit

Neog

2021

SEF

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“…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. Most of the studies either use WHO's 11th March 2020 declaration of COVID 19 as global pandemic as event date or the 23rd of January 2020 when the Chinese government imposed lockdown in Wuhan to prevent the spread of contagion such as He et al (2020a), Ramelli and Wagner (2020) and Xiong et al (2020) and used the developed market context to analyze the pandemic effect (Zhang et al, 2020;Zeren and Hizarci, 2020;Liu et al, 2020).…”

Section: Ajarmentioning

confidence: 99%

“…To ensure the accuracy of the predicted return estimate, this study followed Brown and Warner (1985) and Agrawal and Kamakura (1995) for selecting estimation windows of 250 trading days, 10 days before the event day respective to the different event days for the selected stock exchanges. The average abnormal return (AAR) is calculated over an 11-day timeframe surrounding a given event, including 10 days before and after the event day, as well as one day on the event day like Maneenop and Kotcharin (2020), He et al, 2020c. The 21-day window prevents overlappingwindow concerns since certain events are near together (Armitage, 1995).…”

Section: Sample Formation and Data Sourcementioning

confidence: 99%

Asian perspective of capital market performance amid the COVID 19 pandemic

Adnan

2022

AJAR

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PurposeThe purpose of this research is to investigate the short-term capital markets' reactions to the public announcement first local detection of novel corona virus (COVID 19) cases in 12 major Asian capital markets.Design/methodology/approachUsing the constant mean return model and the market model, an event study methodology has been implied to determine the cumulative abnormal returns (CARs) of 10 pre and post-event trading days. The statistical significance of the data was assessed using both parametric and nonparametric test statistics.FindingsFirst discovery of local COVID 19 cases had a substantial impact on all 12 Asian markets on the event day, as shown by statistically significant negative average abnormal return (AAR) and cumulative average abnormal return (CAAR). The single factor ANOVA result has also demonstrated that there is no variability among 12 regional markets in terms of short-term market responses. Furthermore, there is little evidence that these major Asian stock market indices differ significantly from the FTSE All-World Index which might suggest possible spillover impact and co-integration among the major Asian capital markets. The study further discovers that market capitalization and liquidity did not have any significant impact on market reaction to announcement.Research limitations/implicationsThe study's contribution might have been compromised by the absence of socio-demographic, technical, financial and other significant policy factors from the analysis.Practical implicationsThese findings will be considerably helpful in tackling this unprecedented epidemic issue for personal and institutional investors, industrial and economic experts, government and policymakers in assessing the market in special circumstances, diversifying risk and developing financial and monetary policy proposals.Originality/valueThis paper is the first to examine the effects of local COVID 19 detection announcement on major Asian capital markets. This study will add to the literature by investigating unusual market returns generated by infectious illness outbreaks and the overall market efficiency and investors' behavioral pattern of major Asian capital markets.

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“…Its impact on economy ( Makin and Layton, 2021 , Yoshino et al, 2021 , Yagi and Managi, 2021 ), government ( Sharma et al, 2020 , Tisdell, 2020 , Park and Chung, 2021 ) and publics ( Vally, 2020 , Watkins and Maruthappu, 2020 ) have unfolded. Given greater availability of data, the research about the effect of COVID-19 on stock market is rich and can be categorized into following aspects: (a) the negative effect of COVID-19 on firm and industry performances ( Gu et al, 2020 , He et al, 2020a , He et al, 2020b , Iyke, 2020a , Qin et al, 2020 , Xiong et al, 2020 ); (b) the increased stock return volatility due to the COVID-19 pandemic ( Dai et al, 2021 , Liu et al, 2020a , Liu et al, 2021 , Nguyen et al, 2021 , Phan and Narayan, 2020 ); (c) the fear sentiment because of the COVID-19 ( Ahmed, 2020 , Baig et al, 2020 , Hoang and Syed, 2021 ); (d) the risk contagion as a result of the COVID-19 pandemic ( Abuzayed et al, 2021 , Akhtaruzzaman et al, 2020 , Corbet et al, 2021 , Jiang et al, 2020 , Sharma, 2020 , Zhang et al, 2021 ). 1…”

Section: Literature Reviewmentioning

confidence: 99%

COVID-19 pandemic effect on trading and returns: Evidence from the Chinese stock market

Bing

2021

Economic Analysis and Policy

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COVID–19's Impact on Stock Prices Across Different Sectors—An Event Study Based on the Chinese Stock Market

Cited by 48 publications

References 17 publications

Effects of the COVID-19 pandemic on stock market returns and volatilities: evidence from selected emerging economies

Effects of the COVID-19 pandemic on stock market returns and volatilities: evidence from selected emerging economies

Asian perspective of capital market performance amid the COVID 19 pandemic

COVID-19 pandemic effect on trading and returns: Evidence from the Chinese stock market

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