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Event study on the reaction of the developed and emerging stock markets to the 2019-nCoV outbreak

Dharen Pandey () and Vineeta Kumari

International Review of Economics & Finance, 2021, vol. 71, issue C, 467-483

Abstract: With a sample of 49 stock market indices of the developed and emerging markets in the world using the standard event methodology, this paper aims to examine the impacts of the 2019-nCoV outbreak on the global stock markets. Previous studies have supported that macroeconomic news and firm-specific news do impact the stock market returns. This study provides evidence for global stock market reactions to epidemics. The study concludes that the 2019-nCoV outbreak has significantly impacted the global stock markets with the Asian stock markets being hit the hardest. Further, the study also analyzed the impacts of lockdowns/restrictions imposed by the economies to contain the 2019-nCoV outbreak. This study evidences that early lockdowns/restrictions imposed by the nations have yielded positive results in containing the spread of the novel coronavirus, thus, rebuilding the investor’s confidence and sharp reversal in the stock market returns. The statistical results establish a high and moderate negative correlation between the cumulative abnormal returns (CARs) and the cumulative cases and deaths both country-wise and that of the world indicating that the cross-country variation in the evolution of cases and fatality rates led to such stock market reactions impacting the market sentiments and anticipation for the future.

Keywords: Event study; Market model; Corrado (1989) test; Developed economy; Emerging economy (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1016/j.iref.2020.09.014

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