Academy of Entrepreneurship Journal (Print ISSN: 1087-9595; Online ISSN: 1528-2686)


Covid-19 Outbreak and Stock Market Reaction: Evidence from Emerging and Advanced Economies

Author(s): Ruchi Priya Khilar, Shikta Singh, Sakti Ranjan Dash, Maheswar Sethi

The present paper aims at examining the stock market reaction to Covid-19 confirmed cases, deaths and lockdown imposed by government in emerging and advanced economies by taking a sample of 34 countries over a period from 4th January 2020 to 30th September 2020. The result documents that the stock market reacts negatively to Covid-19 outbreak particularly daily confirmed cases and lockdown in both emerging and advanced economies. However, the impact of daily deaths is found to be asymmetric. Death has positive influence on stock market of emerging economies while it has negative impact on advanced economies. Furthermore the study also checked long-run relationship among variables by performing panel cointegration test and found an asymmetric behaviour in relation to level of economy. There is a long-run relationship among the variables of emerging economies while such relationship is absent in advanced economies. This paper contributes to the existing literature on the stock market performance in various ways. Firstly, unlike other studies being limited to a specific country, this paper depicts the effect of the Covid-19 pandemic on the stock market from a large sample of 34 countries. Secondly, it provides insights on the reactions of stock market on the outbreak of Covid-19 pandemic owing to level of economic development of the country, i.e., emerging and advanced economies. Thirdly, this is the first paper to assess the impact of the government stringent measure for Covid-19 i.e., lockdown on the stock market.

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