Stock Market Reaction to COVID-19: Evidence in Customer Goods Sector with the Implication for Open Innovation

Abstract

The coronavirus pandemic has spread all over the world, affecting both the health and economic sectors. The aim of this research was to observe stock prices of customer goods before and after the COVID-19 pandemic using event study and the comparison test. The sample included data of daily closing stock prices and volume of stock trade during the three months before (−90 days) and after (+90 days) the occurrence of the COVID-19 pandemic ongoing, totaling 2670 observation data both before and after the COVID-19 pandemic, for a total of 5340. The research findings indicate a significant difference between the daily closing stock price and volume of stock trade before and after the COVID-19 pandemic. The current research has both theoretical and practical implications: the findings strengthen the efficient market hypothesis, which states that the more complete the provided information, the more efficient the market. The practical implication is that investors should be careful when choosing to invest. Investors should choose customer goods sector companies that provide products that are much needed by customers, for example, pharmacy, food, beverages, etc. Future research is needed to investigate the long-term impact of the pandemic on the economy.

Impact of COVID-19 on stock market efficiency: Evidence from developed countries

“…Stock market efficiency is commonly affected by different occurrences, to different degrees. Machmuddah et al (2020) stated that corporate actions such as splits, right issues, and warrants can affect stock market efficiency, albeit slowly, while unexpected black swan occurrences such as economic embargoes, boom explosions, mass chaos, and pandemics can trigger very strong one-time impacts in the stock markets. It is a widely accepted concept in behavioral finance that occurrences instigating widespread panic, such as wars, elections, economic, political and financial crises, terrorist events, depressions, bubbles, exchange rate regimes, shocks, crashes, and pandemics, often lead to a breakdown of the efficient market hypothesis by causing asset prices to deviate from their fundamental values (see Kim et al, 2011 ; Lim et al, 2013 ; Niemczak and Smith, 2013 ; Urquhart and Hudson, 2013 ; Rodriguez et al, 2014 ; Charles et al, 2015 ; Khediri and Charfeddine, 2015 ; Verheyden et al, 2015 ; Charfeddine and Khediri, 2016 ; Rahman et al, 2017 ; Charfeddine et al, 2018 ; Lalwani and Meshram, 2020 ).…”

Sentimen Investor terhadap Stock Return JII di Awal COVID-19

“…Setiap kebijakan pemerintah terkait covid-19 akan direspon oleh perusahaan emiten dengan beragam bentuk. Machmuddah et al (2020) mengungkap bahwa manajer dengan sense of crisis yang baik akan berusaha beradaptasi dan merubah sistem operasional perusahaan dengan melakukan inovasi maupun meningkatkan transparansi informasi untuk menjaga kepentingan stakeholders perusahaan di masa pandemi. Upaya transparansi serta inovasi yang dilakukan perusahaan emiten dan diungkap kepada publik akan menjadi sinyal positif bagi investor karena mereka menganggap perusahaan mampu bertahan dan menjamin kepentingannya (Nambisan et al, 2019).…”

Pandemic Attack and Islamic Stocks Index: A Cross Country Analysis

“…The coronavirus also triggered the decline in stock market prices especially following the World Health Organization (WHO) declaration of its pandemic status which led to negative abnormal returns in the market (Alali, 2020;Liu, Manzoor, Wang, Zhang, & Manzoor 2020). The pandemic impacted the capital market, caused changes in trading times, and transmitted negative signals (bad news), which together eventually induced investors into selling their shareholdings (Corbet, Hou, Hu, & Oxley 2020;Machmuddah, Utomo, Suhartono, Ali, & Ghulam 2020). The conditions created by the pandemic also affected stock market dynamics, causing stock exchanges around the world to decline leading to increasing inefficiency in the market (He, Liu, Wang, & Yu 2020;Lalwani & Meshram 2020;Liu et al 2020;Ngwakwe, 2020).…”