The impact of the COVID-19 pandemic on travel cryptocurrency and stock market performances: an event-study approach

Abstract

Purpose This paper aims to evaluate the impact of the COVID-19 pandemic on the performance of travel cryptocurrency and stock markets over a long period during the pandemic. Design/methodology/approach A generalized autoregressive conditional heteroskedasticity model was developed for 6 travel cryptocurrencies and the top 10 hotel, 7 airline and 26 restaurant stocks listed on the NASDAQ stock exchange. An event-study approach was applied to the emergence of the novel coronavirus and its variant, Omicron. Additionally, abnormal returns of the respective assets in response to such events were estimated. Findings Results indicated that the travel cryptocurrency market did not respond to the early stage of the pandemic, but NASDAQ hotel, restaurant and airline stocks revealed abnormal negative returns when the pandemic manifested in the USA. Upon the official US declaration of a pandemic, both cryptocurrencies and tourism stocks showed abnormal negative returns, but these were considerably greater among stocks than cryptocurrencies. Conversely, in response to the Omicron variant, only hotel, restaurant and airline stocks showed abnormal negative returns. Practical implications These results imply that travel cryptocurrencies are a financial instrument independent of hotel, restaurant or airline stocks. Thus, adopting travel cryptocurrencies may help investors and businesses diversify risk during long-duration crises such as COVID-19. Originality/value To the best of the author’s knowledge, this paper is the first empirical study to investigate the impact of the COVID-19 pandemic on the recently emerging travel cryptocurrency market using an event-study approach to investigate how it differs from tourism stock performances.

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“…The rapid digitalization during the COVID-19 pandemic established the foundation for digital currency development (Loh et al , 2023). Furthermore, digital currency demonstrated significant potential as both a payment method and investing tool (Kim, 2023). For example, volatile cryptocurrencies recently emerged as a safety net to store value following the Credit Suisse crisis and the failure of several US banks.…”