Stock Market Reaction to the Announcement of the COVID‐19 Lockdown: Evidence from Healthcare Companies in Malaysia

Abstract

The sudden global pandemic of COVID-19 occurred in Malaysia at the beginning of new 2020, which increased the uncertainty of the economy. As a highly demanded industry during diseases, COVID-19-related news had a mixed influence on investors’ confidence in the healthcare industry, so the short-term market reaction of the Malaysian healthcare industry is investigated during this unfolding event. This paper examines whether the “lockdown” suppressed the influence of COVID-19 pandemic on stock performance in 12 listed healthcare companies in Malaysia. We consider the “lockdown” order has different impacts on samples. The hardest hit among the four events is the first announcement of lockdown, whose cumulative average abnormal return (CAAR) is negative (CAAR<0), for its strict movement control. However, the impacts of the following three lockdown events are positive and less severe as the market gradually digest these kinds of news and the deregulation of movement control. Previous studies have justified the influence of disease outbreaks on the stock market; however, this study compensates for other studies by employing the event study methodology (ESM) approach to provide the first empirical evidence of the unprecedented influence of “lockdown” on Malaysian healthcare stock market. This study has practical implications for Malaysian financial markets that the lockdown orders matter for the Malaysian healthcare industry. The empirical results show that the stock market has positively affected the lockdown announcement after the first event. In turn, the policymakers could draw on these results related to stock performance to modify the regulations in the healthcare industry.

COVID-19 Government restriction policy, COVID-19 vaccination and stock markets: Evidence from a global perspective

“…Before the advent of COVID-19 vaccination, we find that the changes of COVID-19 stringency indexes have negative impact on stock market returns, which keeps in line with Abdullah et al (2022) , Aharon & Siev (2021) , Kheni & Kumar (2021) and Caporale et al (2022) . Our empirical results suggest that the total volatility of COVID-19 stringency indexes positively correlates to the total volatility of stock markets, on some extent, providing evidence that support the research results of Martins & Cró (2022) , Bouri et al (2022) , Wang et al (2021) , Narayan et al, 2021 ; Xie & Zhou (2022) . Different from previous literature, we find that the impact of the bad volatility of COVID-19 stringency index on stock market's bad volatility is stronger than that of the good volatility of COVID-19 stringency index on stock market's good volatility, giving more details on the relationship.…”

“…There has been a string of studies on what happens to stock markets during COVID-19 pandemic. Throughout the existing literature, a small part of studies pay attention on the impact of COVID-19 restriction policies on stock market in given countries, such as the United States ( Martins & Cró, 2022 ; Mishra et al, 2022 ), Vietnam ( Anh & Gan, 2020 ), Malaysia ( Xie & Zhou, 2022 ), G20 countries ( Caporale et al, 2022 ), G7 countries ( Narayan et al, 2021 ). Using different methods and different empirical sample, different findings are generated on the relationship between COVID-19 restriction policy.…”

“…Using different methods and different empirical sample, different findings are generated on the relationship between COVID-19 restriction policy. Some scholars argue that stock returns are negatively affected by government restrictions ( Abdullah et al,2022 ; Aharon & Siev,2021 ; Kheni & Kumar,2021 ; Caporale et al,2022 ), but some other scholars argue that stock markets react positively to government lockdown policies ( Martins & Cró, 2022 ; Bouri et al,2022 ; Wang et al,2021 ; Narayan et al, 2021 ; Xie & Zhou (2022) . However, Abdullah et al (2022) find that the long-term and short-term negative effect is asymmetric, Anh & Gan (2020) find than Vietnam's stock returns react negatively COVID-19 pre-lock down while positively during the lockdown period.…”

“…Our study has some contributions as follows. First of all, unlike the literature that purely studies the relationship between vaccinations and the stock market (e.g., Apergis et al, 2022 ; Behera et al, 2022 ), or purely studies the impact of COVID-19 government restrictions on stock market (e.g., Anh & Gan, 2020 ; Narayan et al, 2021 ; Caporale et al, 2022 ; Kizys et al, 2021 ; Scarcella et al, 2022 ; Xie & Zhou, 2022 ), we systematically examine the impact of COVID-19 government restrictions on stock market and the role played by COVID-19 vaccination. We not only explore the role of the advent of COVID-19 vaccination, but also examine whether COVID-19 restriction policy can play a mediate path in the impact of COVID-19 vaccination rate on stock markets.…”