COVID-19 - Analysis of stock performances through event studies

Details

Supervisors

Anh Nguyen

Faculty

Louvain School of Management

Degree label

Master [120] en sciences de gestion, à finalité spécialisée

Abstract

The objective of this paper is to analyse the effects on the S&P500, the STOXX EUROPE 600 and the Nikkei225 and their component sectors of three events that occurred during the Covid- 19 health crisis. For this purpose, the event study methodology is used. This was carried out over an event window of twenty days (-10;10) in order to observe the reaction of market returns following the announcements. In terms of index returns, the S&P500 was the best performing index while the Nikkei225 was the worst performing. No significant results are apparent. At the sector level, while the majority of sectors show significant cumulative abnormal returns, particularly in the United States following the announcement of the W.H.O. of the term pandemic to qualify the Covid-19, this trend is not confirmed on the other events studied. This could therefore mean that during the first event studied, the returns observed on the markets largely differed from their expected returns and that subsequently, during the launch of the first US vaccine (Pfizer) and the announcement of the W.H.O. of the new Delta variant, a less significant fall in stock returns compared to their expected behaviour according to the CAPM model was observed. On the other hand, on the European and Asian markets, the results of the cumulative abnormal returns observed do not seem to be significant during the different events studied. However, an exception appears on the Japanese market which displays 83% of the significant cumulative abnormal returns during the third event. This indicates that the Japanese market was significantly impacted in all sectors during the third event analysed. The energy sector has the highest cumulative abnormal returns of the six sectors defined, while technology has the lowest cumulative abnormal returns. These results should be taken with a certain amount of hindsight, as the event study methodology seems to have some limitations.