Stock Market Responses to the COVID-19 Health Crisis

Abstract

The outbreak of the novel COVID-19 pandemic emerged as a major black swan event which has caused shock waves and severely hurt the sentiments of market participants. The pandemic has raised uncertainties and risks all over the world, impacting substantially the world's 20 largest economies. While the stock markets' intense reaction to the official news of the pandemic is well known, the reaction of largest world economies during the initial phases of the outbreak until 11th March 2020 is not very well established. Therefore, the present study investigates how stock markets in world's 20 largest economies have reacted to major events and press releases associated with disease from the beginning of the pandemic (i.e., 31st December 2020 till 11th March 2020). The results of the study suggest that the declaration of the novel COVID-19 as a pandemic was the most devastating event for stock markets. This was confirmed by using various parametric and non-parametric tests. In addition, the last event was further analyzed by observing CARs of various indices individually.