Capital Market Reactions to the Arrival of COVID-19: A Developing Market Perspective

Abu Taleb Mohammad Adnan (), Mohammad Mahadi Hasan () and Ezaz Ahmed ()
Additional contact information
Abu Taleb Mohammad Adnan: BGMEA University of Fashion and Technology (BUFT), Dhaka, Bangladesh
Mohammad Mahadi Hasan: Anwar Khan Modern University, Dhaka, Bangladesh
Ezaz Ahmed: Columbia College, Columbia, USA

Economic Research Guardian, 2020, vol. 10, issue 2, 97-121

Abstract: Research findings on Capital markets’ reaction to infectious diseases in emerging market contexts are not comprehensible. Therefore, using the daily individual stock’s return of 311 listed firms during an estimation period of 250 trading days; this research applies an Event Study Methodology to define the immediate stock market response to Covid19’s arrival in Bangladesh. Mean Return Model, Market Return Model, and Market model are applied to determine the Average Abnormal Returns and Cumulative Average Abnormal Returns for short term event window. Both Parametric and non-parametric tests of the significance of returns around the several event windows suggest that, despite the perceived weak market efficiency, the local stock market shows unprecedented efficient market reaction to the announcement. The significant statistical difference of CAAR between industry segments in both pre and post-event windows signifies that the negative impact of the announcement was identical for all industry segments. Behavioral overreaction induced Panic selling and herding effect has also been observed among investors due to the announcement. Findings from the study will be useful for investors and financial analysts in accessing the unpredictable systematic risk in portfolio diversification while facilitating policymakers to construct contingency strategy.

Keywords: COVID19; Capital market; Event study; emerging Economy; Bangladesh (search for similar items in EconPapers)
JEL-codes: G10 G12 G14 (search for similar items in EconPapers)
Date: 2020
References: Add references at CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://www.ecrg.ro/files/p2020.10(2)20y3.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wei:journl:v:10:y:2020:i:2:p:97-121

Access Statistics for this article

Economic Research Guardian is currently edited by Mihai Mutascu

More articles in Economic Research Guardian from Mutascu Publishing
Bibliographic data for series maintained by Mihai Mutascu ().