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The impact of COVID-19 global health crisis on stock markets and understanding the cross-country effects

The impact of COVID-19 global health crisis on stock markets and understanding the cross-country... This paper aims to investigate the impact of the coronavirus (COVID-19) on major stock markets. Specifically, an event study analysis is executed to estimate the abnormal returns of selected stock indices from 15 countries to key events concerning the global pandemic.Design/methodology/approachSpecifically, an event study analysis is executed to estimate the abnormal returns of selected stock indices from 15 countries to key events concerning the global pandemic. The study continues with a regression analysis that looks into cross-country variation of estimated abnormal returns by using country-specific characteristics as predictors.FindingsThe results indicate that stock markets of countries that have larger foreign direct investment exposure to China, higher democracy index, a higher number of confirmed COVID-19 cases and that accept a higher percentage of Chinese tourists are more prone to getting negatively affected by such a global health crisis. On the other hand, stock markets of countries with higher health expenditure, a higher level of preparedness for pandemics and higher gross domestic product per capita are likely to have less negative abnormal returns.Originality/valueIt is one of the first studies that focuses on determining the country-specific characteristics that influence the reaction of financial markets to a global health crisis that the world is experiencing today with the COVID-19 infectious disease. Investigating cross-country effects is very relevant and important today because countries and their relevant policymakers can take lessons and get better prepared for future pandemics only by recognizing the relevant points that are underlying and shape the response of the country’s economy to such a global health crisis. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Pacific Accounting Review Emerald Publishing

The impact of COVID-19 global health crisis on stock markets and understanding the cross-country effects

Pacific Accounting Review , Volume 33 (1): 18 – Aug 4, 2021

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Publisher
Emerald Publishing
Copyright
© Emerald Publishing Limited
ISSN
0114-0582
DOI
10.1108/par-07-2020-0096
Publisher site
See Article on Publisher Site

Abstract

This paper aims to investigate the impact of the coronavirus (COVID-19) on major stock markets. Specifically, an event study analysis is executed to estimate the abnormal returns of selected stock indices from 15 countries to key events concerning the global pandemic.Design/methodology/approachSpecifically, an event study analysis is executed to estimate the abnormal returns of selected stock indices from 15 countries to key events concerning the global pandemic. The study continues with a regression analysis that looks into cross-country variation of estimated abnormal returns by using country-specific characteristics as predictors.FindingsThe results indicate that stock markets of countries that have larger foreign direct investment exposure to China, higher democracy index, a higher number of confirmed COVID-19 cases and that accept a higher percentage of Chinese tourists are more prone to getting negatively affected by such a global health crisis. On the other hand, stock markets of countries with higher health expenditure, a higher level of preparedness for pandemics and higher gross domestic product per capita are likely to have less negative abnormal returns.Originality/valueIt is one of the first studies that focuses on determining the country-specific characteristics that influence the reaction of financial markets to a global health crisis that the world is experiencing today with the COVID-19 infectious disease. Investigating cross-country effects is very relevant and important today because countries and their relevant policymakers can take lessons and get better prepared for future pandemics only by recognizing the relevant points that are underlying and shape the response of the country’s economy to such a global health crisis.

Journal

Pacific Accounting ReviewEmerald Publishing

Published: Aug 4, 2021

Keywords: Abnormal returns; Stock market; COVID-19; Health expenditure; Cross-country effects; GHS index; F30; G12; G14; G15; H12; H50; H63

References