The Short-Term Effects of COVID-19 on China’s Stock Market

Huy Pham, Vikash Ramiah, Nisreen Moosa, Giancarlo Giudici and Vijay Pereira

Chapter 9 in Financial Transformations Beyond the COVID-19 Health Crisis, 2022, pp 253-286 from World Scientific Publishing Co. Pte. Ltd.

Abstract: We investigate the impact of COVID-19 on 36 sectors of China’s stock market as classified by Thomson Reuters Eikon. By applying the event study methodology, we examine short-term changes of up to 10 days in stock prices and returns following events pertaining to COVID-19 for the period between December 31, 2019, and March 10, 2020. The evidence captures the gloomy effect of the virus on the Chinese market. We find statistically significant negative abnormal returns following many events across sectors, whereby the most significant effect is widely observed on February 4, 2020. The results are supported by various robustness tests including those of Corrado (1989) and Chesney et al. (2011), as well as allowing for market integration. In addition, we document changes in systematic risk by using various ARCH models such as GARCH (1,1), TARCH, PARCH, and EGARCH. We find several spikes — instant changes in systematic risk — in the travel and leisure sector while pharmaceuticals and biotechnology and healthcare equipment and services sectors seem to benefit from the pandemic.

Keywords: COVID19; Pandemic; Pandemic Outbreak; Health Crisis; Economics; Macroeconomics; Finance; Sustainable Finance; Financial Crisis; Financial Integration; Economic Integration; Global Financial Crisis; Financial Institutions; Corporate Finance; Corporate Governance; Board of Directors; ESG; Corporate Social Responsibility; Sustainable Finance; Stock Markets; Financial Markets; Stock Market Behaviour; Firm Liquidity; Emerging Markets; China; Financial Institutions; Money; Banks; Banking System; Banking Sector; Business Groups; Resilience; Safe Heaven; Gold; Oil; Peer-to-Peer Lending Market; Foreign Trading; Stock Market Volatility; Extreme Events (search for similar items in EconPapers)
JEL-codes: F4 F62 G15 G17 G3 O16 (search for similar items in EconPapers)
Date: 2022
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