Stock market reaction to the COVID-19 pandemic: an event study

Xiuping Ji, Naipeng (Tom) Bu (), Chen Zheng, Honggen Xiao, Caixia Liu, Xuesheng Chen and Kangping Wang
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Xiuping Ji: The University of Sussex
Naipeng (Tom) Bu: Shandong University
Chen Zheng: Leeds Beckett University
Honggen Xiao: The Hong Kong Polytechnic University
Caixia Liu: Shandong University
Xuesheng Chen: Shandong University
Kangping Wang: Shandong University

Portuguese Economic Journal, 2024, vol. 23, issue 1, No 9, 167-186

Abstract: Abstract The COVID-19 pandemic created unprecedented challenges for communities and economies around the world. Based on 13 leading global stock indices, the event study method is adopted in this research to explore the impact of the COVID-19 pandemic on the performance of the stock market indices in the short term. Regression results show that the global stock markets performed poorly in response to the COVID-19 pandemic. The findings of the event study imply that the stock markets reacted rapidly and negatively to the COVID-19 pandemic when lockdown restrictions were announced to contain the spread of the novel coronavirus. The Asian stock indices experienced more negative abnormal earnings than the stock indices of the countries outside Asia. Moreover, investor sentiments act as a wedge between financial investment decisions, returns, and fear of uncertainty caused by the pandemic. Furthermore, the panic experienced by investors may be an effective transmission channel through which the COVID-19 outbreak affects the returns on the stock market indices.

Keywords: Abnormal return; COVID-19 pandemic; Financial performance; Investor sentiment; Lockdown; Stock index (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s10258-022-00227-w

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