STOCK MARKET REACTION TO COVID-19 PANDEMIC: An Empirical Analysis of Major Global Indices

Abstract

The present study examined the behaviour of the ten major stock indices with the highest market capitalization in the global financial market during the COVID-19 pandemic, using an event study approach. Further, the abnormal returns (AR) from the event study are regressed on the death cases due to COVID-19, on returns of selected stock indices, and on market returns to obtain more robust results. The results revealed that all the major indices were affected by the lockdown announcement in their respective countries and continued to yield negative abnormal returns during the lockdown phase, except the Hang Sheng Index of Hong Kong. The opposite reaction of the investors in Hong Kong led to an unperturbed Hang Sheng stock market amid a global crisis. Findings will help investors understand the behaviour of major stock indices during a crisis period and enable them prepare their portfolios accordingly to withstand risky periods. Also, investors' attitudes towards investment risk can make a notable difference in the economy. � 2022, Nigerian Economic Society. All rights reserved.