The effect of the COVID-19 announcement on stock returns: evidence from Egypt

Wael Ahmed Elgharib

African Journal of Economic and Management Studies, 2023, vol. 14, issue 3, 420-431

Abstract: Purpose - This study aims at testing efficiency of the Egyptian stock market at semi-strong level through exploring the impact of the COVID-19 outbreak on Egyptian stock returns. Design/methodology/approach - The author applied the “Event Study” method that addresses the impact of a particular event or group of events on stock returns, from 12 September 2019 to 5 April 2020, choosing Egyptian Stock Exchange (EGX) 100 companies which constitute constitutes the highest-level 100 companies in terms of liquidity and activity. Findings - The study found inefficiency of the Egyptian stock market at the semistrong level, as the declaration of the COVID-19 has a negative insignificant effect on stock returns, whether on the day of the declaration, before or after it, The underlying reasons for these results can be referred to the idea that can be explained that investors are noise trading when making their investment decisions. Research limitations/implications - There are two limitations to the interface of this paper. The first one is the short-term impact of COVID-19, using 141 days, and then it is not clear in the research the long-term impact of events related to the epidemic. Secondly, because the author deals with a short period term, the author does not test the characteristics of the company or any other major events that may affect the stock returns of the companies under study. Originality/value - This adds to the finance literature on the impact of the COVID-19 announcement on stock returns in the context of African countries. The explanation of the interconnection of the COVID-19 announcement on stock returns in Egypt.

Keywords: COVID-19; Market efficiency; Event study analysis; Average abnormal return; Cumulative average abnormal return (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eme:ajemsp:ajems-11-2022-0441

DOI: 10.1108/AJEMS-11-2022-0441

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