IDEAS home Printed from https://ideas.repec.org/a/gam/jijerp/v17y2020i8p2800-d347370.html
   My bibliography  Save this article

The COVID-19 Outbreak and Affected Countries Stock Markets Response

Author

Listed:
  • HaiYue Liu

    (Business School, Sichuan University, Chengdu 610064, China, seamoon@scu.edu.cn (H.L.))

  • Aqsa Manzoor

    (Business School, Sichuan University, Chengdu 610064, China, seamoon@scu.edu.cn (H.L.))

  • CangYu Wang

    (Business School, Sichuan University, Chengdu 610064, China, seamoon@scu.edu.cn (H.L.))

  • Lei Zhang

    (School of Computer Science, Sichuan University, Chengdu 610064, China)

  • Zaira Manzoor

    (Economics Department, Shandong University, Jinan 250100, China)

Abstract

This paper evaluates the short-term impact of the coronavirus outbreak on 21 leading stock market indices in major affected countries including Japan, Korea, Singapore, the USA, Germany, Italy, and the UK etc. The consequences of infectious disease are considerable and have been directly affecting stock markets worldwide. Using an event study method, our results indicate that the stock markets in major affected countries and areas fell quickly after the virus outbreak. Countries in Asia experienced more negative abnormal returns as compared to other countries. Further panel fixed effect regressions also support the adverse effect of COVID-19 confirmed cases on stock indices abnormal returns through an effective channel by adding up investors’ pessimistic sentiment on future returns and fears of uncertainties.

Suggested Citation

  • HaiYue Liu & Aqsa Manzoor & CangYu Wang & Lei Zhang & Zaira Manzoor, 2020. "The COVID-19 Outbreak and Affected Countries Stock Markets Response," IJERPH, MDPI, vol. 17(8), pages 1-19, April.
    • Handle: RePEc:gam:jijerp:v:17:y:2020:i:8:p:2800-:d:347370
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/1660-4601/17/8/2800/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/1660-4601/17/8/2800/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Aileen J. Thompson, 1993. "The Anticipated Sectoral Adjustment to the Canada-United States Free Trade Agreement: An Event Study Analysis," Canadian Journal of Economics, Canadian Economics Association, vol. 26(2), pages 253-271, May.
    2. Jong-Wha Lee & Warwick J. McKibbin, 2004. "Globalization and Disease: The Case of SARS," Asian Economic Papers, MIT Press, vol. 3(1), pages 113-131.
    3. Shu, Hui-Chu, 2010. "Investor mood and financial markets," Journal of Economic Behavior & Organization, Elsevier, vol. 76(2), pages 267-282, November.
    4. Smith, Richard D., 2006. "Responding to global infectious disease outbreaks: Lessons from SARS on the role of risk perception, communication and management," Social Science & Medicine, Elsevier, vol. 63(12), pages 3113-3123, December.
    5. Donadelli, Michael & Kizys, Renatas & Riedel, Max, 2016. "Globally dangerous diseases: Bad news for Main Street, good news for Wall Street?," SAFE Working Paper Series 158, Leibniz Institute for Financial Research SAFE.
    6. Mohamed Zouaoui & Geneviève Nouyrigat & Francisca Beer, 2011. "How does investor sentiment affect stock market crises?Evidence from panel data," Working Papers CREGO 1110304, Université de Bourgogne - CREGO EA7317 Centre de recherches en gestion des organisations.
    7. Ball, R & Brown, P, 1968. "Empirical Evaluation Of Accounting Income Numbers," Journal of Accounting Research, Wiley Blackwell, vol. 6(2), pages 159-178.
    8. Mohamed Zouaoui & Geneviève Nouyrigat & Francisca Beer, 2011. "How Does Investor Sentiment Affect Stock Market Crises? Evidence from Panel Data," The Financial Review, Eastern Finance Association, vol. 46(4), pages 723-747, November.
    9. Alan Siu & Y. C. Richard Wong, 2004. "Economic Impact of SARS: The Case of Hong Kong," Asian Economic Papers, MIT Press, vol. 3(1), pages 62-83.
    10. Jau-Lian Jeng, 2015. "Analyzing Event Statistics in Corporate Finance," Palgrave Macmillan Books, Palgrave Macmillan, number 978-1-137-49160-2, December.
    11. Chiang, Thomas C. & Jeon, Bang Nam & Li, Huimin, 2007. "Dynamic correlation analysis of financial contagion: Evidence from Asian markets," Journal of International Money and Finance, Elsevier, vol. 26(7), pages 1206-1228, November.
    12. Kaplanski, Guy & Levy, Haim, 2010. "Sentiment and stock prices: The case of aviation disasters," Journal of Financial Economics, Elsevier, vol. 95(2), pages 174-201, February.
    13. Morales, Lucía & Andreosso-O’Callaghan, Bernadette, 2012. "The current global financial crisis: Do Asian stock markets show contagion or interdependence effects?," Journal of Asian Economics, Elsevier, vol. 23(6), pages 616-626.
    14. Baker, Malcolm & Wurgler, Jeffrey & Yuan, Yu, 2012. "Global, local, and contagious investor sentiment," Journal of Financial Economics, Elsevier, vol. 104(2), pages 272-287.
    15. Fama, Eugene F, et al, 1969. "The Adjustment of Stock Prices to New Information," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 10(1), pages 1-21, February.
    16. Joseph E. Engelberg & Christopher A. Parsons, 2011. "The Causal Impact of Media in Financial Markets," Journal of Finance, American Finance Association, vol. 66(1), pages 67-97, February.
    17. Yi-Hsien Wang & Fu-Ju Yang & Li-Je Chen, 2013. "An investor's perspective on infectious diseases and their influence on market behavior," Journal of Business Economics and Management, Taylor & Francis Journals, vol. 14(sup1), pages 112-127, June.
    18. Mohamed Zouaoui & G. Nouyrigat & F. Beer, 2011. "How Does Investor Sentiment Affect StockMarket Crises? Evidence from Panel Data," Post-Print halshs-00785809, HAL.
    19. A. Craig MacKinlay, 1997. "Event Studies in Economics and Finance," Journal of Economic Literature, American Economic Association, vol. 35(1), pages 13-39, March.
    20. Ye Bai, 2014. "Cross-border sentiment: an empirical analysis on EU stock markets," Applied Financial Economics, Taylor & Francis Journals, vol. 24(4), pages 259-290, February.
    21. Del Giudice, Alfonso & Paltrinieri, Andrea, 2017. "The impact of the Arab Spring and the Ebola outbreak on African equity mutual fund investor decisions," Research in International Business and Finance, Elsevier, vol. 41(C), pages 600-612.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Tihana Škrinjarić, 2021. "Profiting on the Stock Market in Pandemic Times: Study of COVID-19 Effects on CESEE Stock Markets," Mathematics, MDPI, vol. 9(17), pages 1-20, August.
    2. Wang, Wenzhao & Duxbury, Darren, 2021. "Institutional investor sentiment and the mean-variance relationship: Global evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 191(C), pages 415-441.
    3. Tao Chen & Erin P. K. So & Isabel K. M. Yan, 2021. "Are crises sentimental?," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(1), pages 962-985, January.
    4. Deven Bathia & Don Bredin & Dirk Nitzsche, 2016. "International Sentiment Spillovers in Equity Returns," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 21(4), pages 332-359, October.
    5. Omer Ahmed Sayed & Hussein Eledum, 2023. "The short‐run response of Saudi Arabia stock market to the outbreak of COVID‐19 pandemic: An event‐study methodology," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(3), pages 2367-2381, July.
    6. Bhanwar Singh & Rosy Dhall & Sahil Narang & Savita Rawat, 2024. "The Outbreak of COVID-19 and Stock Market Responses: An Event Study and Panel Data Analysis for G-20 Countries," Global Business Review, International Management Institute, vol. 25(3), pages 606-631, June.
    7. Mehwish Aziz Khan & Eatzaz Ahmad, 2018. "Measurement of Investor Sentiment and Its Bi-Directional Contemporaneous and Lead–Lag Relationship with Returns: Evidence from Pakistan," Sustainability, MDPI, vol. 11(1), pages 1-20, December.
    8. Chiu, Junmao & Chung, Huimin & Ho, Keng-Yu & Wu, Chih-Chiang, 2018. "Investor sentiment and evaporating liquidity during the financial crisis," International Review of Economics & Finance, Elsevier, vol. 55(C), pages 21-36.
    9. Nawaf Almaskati & Ron Bird & Yue Lu & Danny Leung, 2019. "Corporate Governance, Information Uncertainty and Market Reaction to Information Signals," Working Papers in Economics 19/15, University of Waikato.
    10. Tingqiang Chen & Binqing Xiao & Haifei Liu, 2018. "Credit Risk Contagion in an Evolving Network Model Integrating Spillover Effects and Behavioral Interventions," Complexity, Hindawi, vol. 2018, pages 1-16, March.
    11. Bildirici, Melike E. & Badur, Mesut M., 2019. "The effects of oil and gasoline prices on confidence and stock return of the energy companies for Turkey and the US," Energy, Elsevier, vol. 173(C), pages 1234-1241.
    12. Agoraki, Maria-Eleni K. & Aslanidis, Nektarios & Kouretas, Georgios P., 2022. "U.S. banks’ lending, financial stability, and text-based sentiment analysis," Journal of Economic Behavior & Organization, Elsevier, vol. 197(C), pages 73-90.
    13. Daniel Perez-Liston & Daniel Huerta-Sanchez & Juan Gutierrez, 2018. "Do Domestic Sentiment and the Spillover of US Investor Sentiment Impact Mexican Stock Market Returns?," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 17(2_suppl), pages 185-212, August.
    14. Dash, Saumya Ranjan & Maitra, Debasish, 2019. "The relationship between emerging and developed market sentiment: A wavelet-based time-frequency analysis," Journal of Behavioral and Experimental Finance, Elsevier, vol. 22(C), pages 135-150.
    15. Shahriar Kabir & Ruhul Salim, 2016. "Can A Common Currency Induce Intra-Regional Trade? The Southeast Asian Perspective," Review of Urban & Regional Development Studies, Wiley Blackwell, vol. 28(3), pages 218-234, November.
    16. Zheng, Yao & Osmer, Eric, 2021. "Housing price dynamics: The impact of stock market sentiment and the spillover effect," The Quarterly Review of Economics and Finance, Elsevier, vol. 80(C), pages 854-867.
    17. Chia-Hao Lee & Pei-I Chou, 2012. "Trading Activity and Financial Market Integration," The Financial Review, Eastern Finance Association, vol. 47(3), pages 589-616, August.
    18. Azilawati Banchit & Sazali Abidin & Sophyafadeth Lim & Fareiny Morni, 2020. "Investor Sentiment, Portfolio Returns, and Macroeconomic Variables," JRFM, MDPI, vol. 13(11), pages 1-14, October.
    19. Anand, Abhinav & Basu, Sankarshan & Pathak, Jalaj & Thampy, Ashok, 2021. "The impact of sentiment on emerging stock markets," International Review of Economics & Finance, Elsevier, vol. 75(C), pages 161-177.
    20. Li, Yingqi & Mittoo, Usha R. & Yu, Xin & Zhang, Zhou, 2021. "The impact of global financial crisis on regulation S private debt market," International Review of Economics & Finance, Elsevier, vol. 73(C), pages 231-248.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jijerp:v:17:y:2020:i:8:p:2800-:d:347370. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.