The effects of the Covid-19 pandemic on securities markets : an event study approach

Abstract

The impact of an event on the return of stocks of listed companies has been a topic of interest for several groups of individuals and as a result a vast number of studies have emerged throughout the years. The Coronavirus disease of 2019 has not only stirred the world from a health perspective but has also impacted other aspects of life. This thesis investigates the returns of stocks listed on a number of securities markets to determine whether or not COVID19 has impacted them. Furthermore, this thesis considers whether the effect, if any, varies across securities markets and industries examined. In order to resolve whether COVID-19, particularly the announcement of a lockdown impacted securities markets, this study employs event study methodology, specifically, the one-factor market model. To complement the analysis of stock returns and to shed further light on the impact of COVID-19 on securities markets, this dissertation also analyses the volume of equity shares traded and new public issues statistics. Research findings indicate that most securities markets analysed experienced a significant and downwards trend in returns as a result of COVID-19. This trend in negative returns over the event window was also noted across several industries examined. Apart from that, results show that investors have increased their trading activity during periods in time where COVID19 was at its most severe points. On the other hand, an increase in new public issues was noted across a number of securities markets. It was ultimately concluded that securities markets were not impacted in the same manner, with results suggesting that emerging markets appear to be more significantly impacted than developed markets. Furthermore, by analysing the impact of COVID-19 across different industries, the study concludes that the industries which stocks listed on securities markets stem from may contribute to the markets’ overall resilience or vulnerability to events such as COVID-19.