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

In: Financial Transformations Beyond the COVID-19 Health Crisis

Author

Listed:
  • Huy Pham
  • Vikash Ramiah
  • Nisreen Moosa
  • Giancarlo Giudici
  • Vijay Pereira

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.

Suggested Citation

  • Huy Pham & Vikash Ramiah & Nisreen Moosa & Giancarlo Giudici & Vijay Pereira, 2022. "The Short-Term Effects of COVID-19 on China’s Stock Market," World Scientific Book Chapters, in: Sabri Boubaker & Duc Khuong Nguyen (ed.), Financial Transformations Beyond the COVID-19 Health Crisis, chapter 9, pages 253-286, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9781800610781_0009
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    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;
    All these keywords.

    JEL classification:

    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • G3 - Financial Economics - - Corporate Finance and Governance
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
    • F62 - International Economics - - Economic Impacts of Globalization - - - Macroeconomic Impacts
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation

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