Asian perspective of capital market performance amid the COVID 19 pandemic

PurposeThe purpose of this research is to investigate the short-term capital markets' reactions to the public announcement first local detection of novel corona virus (COVID 19) cases in 12 major Asian capital markets.Design/methodology/approachUsing the constant mean return model and the market model, an event study methodology has been implied to determine the cumulative abnormal returns (CARs) of 10 pre and post-event trading days. The statistical significance of the data was assessed using both parametric and nonparametric test statistics.FindingsFirst discovery of local COVID 19 cases had a substantial impact on all 12 Asian markets on the event day, as shown by statistically significant negative average abnormal return (AAR) and cumulative average abnormal return (CAAR). The single factor ANOVA result has also demonstrated that there is no variability among 12 regional markets in terms of short-term market responses. Furthermore, there is little evidence that these major Asian stock market indices differ significantly from the FTSE All-World Index which might suggest possible spillover impact and co-integration among the major Asian capital markets. The study further discovers that market capitalization and liquidity did not have any significant impact on market reaction to announcement.Research limitations/implicationsThe study's contribution might have been compromised by the absence of socio-demographic, technical, financial and other significant policy factors from the analysis.Practical implicationsThese findings will be considerably helpful in tackling this unprecedented epidemic issue for personal and institutional investors, industrial and economic experts, government and policymakers in assessing the market in special circumstances, diversifying risk and developing financial and monetary policy proposals.Originality/valueThis paper is the first to examine the effects of local COVID 19 detection announcement on major Asian capital markets. This study will add to the literature by investigating unusual market returns generated by infectious illness outbreaks and the overall market efficiency and investors' behavioral pattern of major Asian capital markets.

Stock Market Reaction to COVID-19: A Cross-Sectional Industry Analysis in Frontier Market

The effect of COVID-19 on the efficiency of frontier stock markets at the industrial level has received little attention. This study aimed to analyze the Dhaka stock exchange's immediate market response to the initial COVID-19 announcement at the industry level. An event study approach was used to cross-sectional daily returns of 311 enterprises grouped into seventeen industry groups to determine anomalous returns for a total of 21 trading days divided into seven separate event periods. According to the findings, the average abnormal return and cumulative average abnormal return for the total market return for the event and the subsequent days were both negative and statistically significant. A cross- sectional industrial analysis found that, except for the paper and printing industries, all other sectors produced a considerably abnormal and uniform negative abnormal return. The most substantial negative cumulative average abnormal returns were seen in event windows (0, 0), (0, +1) and (0, +5), which might be attributed to post-announcement drift and inefficient market activity. Furthermore, when comparing the results of the Manufacturing and Non-Manufacturing sectors, the Manufacturing sector had more gloomy outcomes. The COVID-19 epidemic was proven to have negative effects on several industry groups, including those in the pharmaceutical, information technology and telecommunications sectors, which were expected to benefit from the outbreak. This is one of the few empirical studies that investigate the impact of the epidemic on the cross-sectional industry stock return in frontier markets. The results of this research will aid both international and domestic investors in their pursuit of the best possible portfolio composition. © 2023 Indian Institute of Management Kozhikode.

THE EMERGENCE OF COVID-19 AND CAPITAL MARKET REACTION: AN EMERGING MARKET SCENARIO ANALYSIS

This paper investigates the capital market reaction to the first detection of the COVID-19 in Bangladesh. Using a sample of 314 listed firms in Dhaka stock Exchange (DSE), this study employed the event study methodology (ESM) to find any abnormal return (AR) associated to the first COVID-19 detection announcement. Three different return models namely mean-adjusted return, market-adjusted return and market model have been used to calculate the abnormal return and test the statistical significance using both parametric crude dependence and standardised cross-sectional T-test along with non-parametric generalised sign-test and Corrado rank-test. The findings suggest that, despite the perceived weak market efficiency, the announcement of the first COVID-19 detection has a significant negative impact on overall market return on the event day. Additionally, the result exhibits the indifferent market reaction of different industry segments such as manufacturing, service, financial, non-financial, pharmaceuticals and IT and telecommunication sectors. The results would be useful for investors, industrial and financial analysts in accessing volatile systemic risk and building an optimal portfolio to solve the pandemic dilemma effectively.

Capital market reactions to the arrival of covid-19: A developing market perspective

Research findings on Capital markets’ reaction to infectious diseases in emerging market contexts are not comprehensible. Therefore, using the daily individual stock’s return of 311 listed firms during an estimation period of 250 trading days;this research applies an Event Study Methodology to define the immediate stock market response to Covid19’s arrival in Bangladesh. Mean Return Model, Market Return Model, and Market model are applied to determine the Average Abnormal Returns and Cumulative Average Abnormal Returns for short term event window. Both Parametric and non-parametric tests of the significance of returns around the several event windows suggest that, despite the perceived weak market efficiency, the local stock market shows unprecedented efficient market reaction to the announcement. The significant statistical difference of CAAR between industry segments in both pre and post-event windows signifies that the negative impact of the announcement was identical for all industry segments. Behavioral overreaction induced Panic selling and herding effect has also been observed among investors due to the announcement. Findings from the study will be useful for investors and financial analysts in accessing the unpredictable systematic risk in portfolio diversification while facilitating policymakers to construct contingency strategy. © 2020, Weissberg SRL. All rights reserved.