Effect of COVID-19 Pandemic on Global Stock Market Values: A Differential Analysis
Keywords:
Stock Markets; Stock values; Investment; Epidemic; COVID-19; Black swan theory; Euronext 100; Shanghai Composite Index; S&P 500; Dow Jones; Unexpected eventAbstract
This paper presents a current analysis of the effect of coronavirus pandemic on select global
stock indexes (SSE Composite Index [China], Euronext 100 [Europe], Dow Jones Industrial Average
[United States of America]. The objective of the paper is to evaluate the extent and direction of the
differential effect of COVID-19 pandemic on select world stock index. The data on stock value
performance were gathered for fifty days before and fifty days within the Coronavirus epidemic; data
were analysed using the paired t-test of difference in mean stock values at an alpha level of 0.05(5%).
The results reveal that the COVID-19 pandemic has different effects on the stock markets. Dow Jones
Industrial Average showed a significant reduction in mean stock value during the coronavirus period,
Chinese Stock Exchange Composite Index experienced a significant increase in mean stock values
during epidemic higher than before the epidemic. On the contrary, the S&P 500 and the Euronext 100
indexes show a non-significant difference in mean stock price. The paper provides direction to stock
market participants, investors and speculators regarding a safer investment destination during this time
of COVID-19 pandemic; the paper serves a good case study for class room teaching and also provides
direction for further research. This paper provides the first empirical research on the early effect of
COVID-19 pandemic on three global important regional stock indexes, which finds that some stock
markets such as the Shanghai Composite Index is resilient to COVID-19 pandemic.
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MSCI (2020). The coronavirus epidemic: Implications for markets. Retrieved from https://www.msci.com/www/blog-posts/the-coronavirus-epidemic/01718848208, date: 02.18.2020.
Nippani, S. & Washer, K. M. (2004). S.A.R.S: A non-event for affected countries’ stock markets? Applied Financial Economics, 14(15), 1105–1110.
Noy, I. & Shields, S. (2019). The 2003 Severe Acute Respiratory Syndrome Epidemic: A Retroactive Examination of Economic Costs. Retrieved from https://www.think-asia.org/bitstream/handle/11540/11253/ewp-591-sars-epidemic-2003-economic-costs.pdf?sequence=1, date: 02.18.2020.
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Alameer, Z.; Elaziz, M. A.; Ewees, A. A.; Ye, H. & Jianhua, Z. (2019). Forecasting copper prices using hybrid adaptive neuro-fuzzy inference system and genetic algorithms. Natural Resources Research, 28(4), pp. 1385-1401.
Bekiros, S.; Boubaker, S.; Nguyen, D. K. & Uddin, G. S. (2017). Black swan events and safe havens: The role of gold in globally integrated emerging markets. Journal of International Money and Finance, 73, pp. 317-334.
Bloom, D. E. & Canning, D. (2000). The health and wealth of nations. Science, 287(5456), pp. 1207-1209.
Chen, M. H.; Jang, S. S. & Kim, W. G. (2007). The impact of the SARS outbreak on Taiwanese hotel stock performance: an event-study approach. International Journal of Hospitality Management, 26(1), pp. 200-212.
Chen, M. P.; Lee, C. C.; Lin, Y. H. & Chen, W. Y. (2018). Did the SARS epidemic weaken the integration of Asian stock markets? Evidence from smooth time-varying cointegration analysis. Economic research-Ekonomska istraživanja, 31(1), pp. 908-926.
Cheung, W.; Fung, S. & Tsai, S. C. (2010). Global capital market interdependence and spillover effect of credit risk: evidence from the 2007–2009 global financial crisis. Applied Financial Economics, 20(1-2), pp. 85-103.
Dang, T. L. & Nguyen, T. M. H. (2020). Liquidity risk and stock performance during the financial crisis. Research in International Business and Finance, 52, p. 101165, retrieved from https://doi.org/10.1016/j.ribaf.2019.101165, date: 01.20.2020.
Del Giudice, A. & Paltrinieri, A. (2017). The impact of the Arab Spring and the Ebola outbreak on African equity mutual fund investor decisions. Research in International Business and Finance, 41, pp. 600-612.
Donadelli, M.; Kizys, R. & Riedel, M. (2018) Globally Dangerous Diseases, Sentiment and Pharmaceutical Stock Prices. Retrieved from http://sfm.finance.nsysu.edu.tw/php/Papers/CompletePaper/038-1674094255.pdf, date: 01.20.2020.
Dong, G. N. & Heo, Y. (2014). Flu epidemic, limited attention and analyst forecast behavior. Limited Attention and Analyst Forecast Behavior (January 15, 2014). Retrieved from: https://pdfs.semanticscholar.org/3769/3d5007e550eb8cf3e8775b7d9ca00606c2fd.pdf, date: 01.20.2020.
Financial Times (2020). Asia stocks slip after WHO labels outbreak a pandemic. Retrieved from https://www.ft.com/content/a0863674-67db-3b99-aeb5-d8bd6439aa33, date: 02.18.2020
Financial Times (2020). OECD warns coronavirus could halve global growth. Retrieved from https://www.ft.com/content/1356af8c-5c6c-11ea-8033-fa40a0d65a98, date: 02.18.2020.
Fitzgerald, M. (2020). Coronavirus and market volatility shuts down the IPO market for potential listings like Airbnb. Retrieved from https://www.cnbc.com/2020/03/14/coronavirus-and-market-volatility-shuts-down-the-ipo-market-for-potential-listings-like-airbnb.html, date: 02.18.2020.
Forbes (2020). China Stocks Show Resilience to COVID-19 Panic. Retrieved from https://www.forbes.com/sites/brendanahern/2020/03/06/china-market-update-china-stocks-show-resilience-to-covid-19-panic/#7f0ac8b0292e, date: 02.18.2020.
Funck, M. & Gutierrez, J. A. (2018). Has Ebola Infected the Market: A Contagious Reaction to a (Media) Health Care Crisis?. Journal of Business Strategies, Retrieved from https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2786001, date: 02.18.2020.
Gormsen, N. J. & Koijen, R. S. (2020). Coronavirus: Impact on Stock Prices and Growth Expectations. University of Chicago, Becker Friedman Institute for Economics Working Paper, (2020-22). Retrieved from https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3555917, date: 02.18.2020.
Guo, M.; Kuai, Y. & Liu, X. (2020). Stock market response to environmental policies: Evidence from heavily polluting firms in China. Economic Modelling, 86, pp. 306-316.
Hafiz, H.; Oei, S. Y.; Ring, D. M. & Shnitser, N. (2020). Regulating in Pandemic: Evaluating Economic and Financial Policy Responses to the Coronavirus Crisis. Boston College Law School Legal Studies Research Paper, (527). Retrieved from: https://lawdigitalcommons.bc.edu/cgi/viewcontent.cgi?article=2280&context=lsfp, date: 02.18.2020.
Hood, M.; Kamesaka, A.; Nofsinger, J. & Tamura, T. (2013). Investor response to a natural disaster: Evidence from Japan’s 2011 earthquake. Pacific-Basin Finance Journal, 25, pp. 240-252.
Horowitz, J (2020). Investors shouldn't be complacent about the coronavirus threat. Retrieved from: https://edition.cnn.com/2020/02/09/investing/stocks-week-ahead/index.html, date: 02.18.2020.
Ichev, R. & Marinč, M. (2018). Stock prices and geographic proximity of information: Evidence from the Ebola outbreak. International Review of Financial Analysis, 56, pp. 153-166.
Jonung, L. & Roeger, W. (2006). The macroeconomic effects of a pandemic in Europe-A model-based assessment. Available at SSRN 920851. Retrieved from: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=920851, date: 02.19.2020.
Keating, J. (2001). An investigation into the cyclical incidence of dengue fever. Social science & medicine, 53(12), pp. 1587-1597.
Kim, J.; Kim, J.; Lee, S. K. & Tang, L. R. (2020). Effects of epidemic disease outbreaks on financial performance of restaurants: Event study method approach. Journal of Hospitality and Tourism Management, 43, pp. 32-41.
Kleintop, J. (2020). Will the Coronavirus Outbreak Lead to a Market Breakdown? Retrieved from: https://www.schwab.com/resource-center/insights/content/will-virus-outbreak-lead-to-market-breakdown, date: 02.18.2020.
Market Watch (2020). How the stock market has performed during past viral outbreaks, as coronavirus infects. Retrieved from https://www.marketwatch.com/story/heres-how-the-stock-market-has-performed-during-past-viral-outbreaks-as-chinas-coronavirus-spreads-2020-01-22, date: 02.18.2020.
Meer, J.; Miller, D. L. & Rosen, H. S. (2003). Exploring the health–wealth nexus. Journal of health economics, 22(5), pp. 713-730.
MSCI (2020). The coronavirus epidemic: Implications for markets. Retrieved from https://www.msci.com/www/blog-posts/the-coronavirus-epidemic/01718848208, date: 02.18.2020.
Nippani, S. & Washer, K. M. (2004). S.A.R.S: A non-event for affected countries’ stock markets? Applied Financial Economics, 14(15), 1105–1110.
Noy, I. & Shields, S. (2019). The 2003 Severe Acute Respiratory Syndrome Epidemic: A Retroactive Examination of Economic Costs. Retrieved from https://www.think-asia.org/bitstream/handle/11540/11253/ewp-591-sars-epidemic-2003-economic-costs.pdf?sequence=1, date: 02.18.2020.
OECD (2020). Coronavirus: the world economy at risk. Retrieved from https://www.oecd-ilibrary.org/docserver/7969896ben.pdf?expires=1583191185&id=id&accname=guest&checksum=EFB60F8FB333CA4AFC435F731C53B2AE, date: 02.18.2020.
Ping, C.K. (2020). Chinese Markets Are Proving Resilient to Coronavirus Turmoil. The Wall Street Journal. Retreived from https://www.wsj.com/articles/chinese-markets-are-proving-resilient-to-coronavirus-turmoil-11583215629, date: 02.18.2020.
Srivastava (2020). The coronavirus outbreak is the ‘biggest danger’ for the global economy since the financial crisis and could halve growth in 2020. Retrieved from https://markets.businessinsider.com/news/stocks/oecd-slashes-2020-global-growth-outlook-on-coronavirus-fears-2020-3-1028954418, date: 02.25.2020.
Talib, N. N. (2007). The Black Swan: The Impact of the Highly Improbable. New York: The Random House Publishing Group, Inc.
Talib, N. N. (2001). Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets. New York: Penguin Random House LLC.
Topliceanu, Ș. C. & Sorcaru, S. L. (2019). The effects of Brexit on the European Union’s economic power and implications on the British economy. Acta Universitatis Danubius. Œconomica, 15(6). Retreived from http://journals.univ-danubius.ro/index.php/oeconomica/article/view/6284, date: 11.14.2019.
The Telegraph (2020). $1 trillion wiped off global stock markets amid coronavirus panic. Retrieved from https://www.telegraph.co.uk/business/2020/02/24/coronavirus-jitters-return-markets-escalation-cases-outside/, date: 02.25.2020.
Wealth Advisor (2020). How the stock market has performed during past viral outbreaks, as epidemic locks down 3 Chinese cities. Retrieved from https://www.thewealthadvisor.com/article/heres-how-stock-market-has-performed-during-past-viral-outbreaks-epidemic-locks-down-3, date: 03.14.2020.
Published
2020-05-26
How to Cite
Ngwakwe, C. C. . (2020). Effect of COVID-19 Pandemic on Global Stock Market Values: A Differential Analysis: Array. Acta Universitatis Danubius. Œconomica, 16(2). Retrieved from https://dj.univ-danubius.ro/index.php/AUDOE/article/view/258
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