IDEAS home Printed from https://ideas.repec.org/a/eee/jaitra/v105y2022ics0969699722001004.html
   My bibliography  Save this article

Airline stock markets reaction to the COVID-19 outbreak and vaccines: An event study

Author

Listed:
  • Martins, António Miguel
  • Cró, Susana

Abstract

This paper examines the short-term market reaction of the airline industry to the declaration of COVID-19 as a global pandemic and to the announcements of the effectiveness of COVID-19 vaccines in the US. Using an event study, we observe a negative and statistically significant stock price reaction to the announcement of COVID-19 as a global pandemic. In contrast, we find a positive impact on the stock market due to the announcements of the effectiveness of COVID-19 vaccines in the US. These results are consistent with the investor sentiment hypothesis and the asset-pricing perspective. The empirical results also show a higher stock market reaction to the announcement of the effectiveness of the Pfizer–BioNTech COVID-19 vaccine in the US compared to the announcements of the effectiveness of subsequent vaccines. This result is explained by the innovation race competition effect and the greater reduction in investor uncertainty levels. These reactions were reinforced or mitigated by firm-specific characteristics such as liquidity, size, leverage, ownership concentration, state control and business model (i.e., low-cost versus full-service).

Suggested Citation

  • Martins, António Miguel & Cró, Susana, 2022. "Airline stock markets reaction to the COVID-19 outbreak and vaccines: An event study," Journal of Air Transport Management, Elsevier, vol. 105(C).
    • Handle: RePEc:eee:jaitra:v:105:y:2022:i:c:s0969699722001004
    DOI: 10.1016/j.jairtraman.2022.102281
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0969699722001004
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jairtraman.2022.102281?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Viral V. Acharya & Timothy Johnson & Suresh Sundaresan & Steven Zheng, 2020. "The Value of a Cure: An Asset Pricing Perspective," NBER Working Papers 28127, National Bureau of Economic Research, Inc.
    2. Thomas W. Bates & Kathleen M. Kahle & René M. Stulz, 2009. "Why Do U.S. Firms Hold So Much More Cash than They Used To?," Journal of Finance, American Finance Association, vol. 64(5), pages 1985-2021, October.
    3. Rafael La Porta & Florencio Lopez‐De‐Silanes & Andrei Shleifer & Robert Vishny, 2002. "Investor Protection and Corporate Valuation," Journal of Finance, American Finance Association, vol. 57(3), pages 1147-1170, June.
    4. Stefano Ramelli & Alexander F Wagner, 2020. "Feverish Stock Price Reactions to COVID-19," The Review of Corporate Finance Studies, Society for Financial Studies, vol. 9(3), pages 622-655.
    5. Thiemo Fetzer & Lukas Hensel & Johannes Hermle & Christopher Roth, 2021. "Coronavirus Perceptions and Economic Anxiety," The Review of Economics and Statistics, MIT Press, vol. 103(5), pages 968–978-9, December.
    6. Tarcisio da Graca & Robert Masson, 2012. "More power to you: properties of a more powerful event study methodology," Review of Accounting and Finance, Emerald Group Publishing Limited, vol. 11(2), pages 166-183, May.
    7. Gu, Lifeng, 2016. "Product market competition, R&D investment, and stock returns," Journal of Financial Economics, Elsevier, vol. 119(2), pages 441-455.
    8. John Y. Campbell, 2000. "Asset Pricing at the Millennium," Journal of Finance, American Finance Association, vol. 55(4), pages 1515-1567, August.
    9. Stefano Ramelli & Alexander F. Wagner, 2020. "Feverish Stock Price Reactions to COVID-19," Swiss Finance Institute Research Paper Series 20-12, Swiss Finance Institute.
    10. Altig, Dave & Baker, Scott & Barrero, Jose Maria & Bloom, Nicholas & Bunn, Philip & Chen, Scarlet & Davis, Steven J. & Leather, Julia & Meyer, Brent & Mihaylov, Emil & Mizen, Paul & Parker, Nicholas &, 2020. "Economic uncertainty before and during the COVID-19 pandemic," Journal of Public Economics, Elsevier, vol. 191(C).
    11. Pagano, Marco & Wagner, Christian & Zechner, Josef, 2023. "Disaster resilience and asset prices," Journal of Financial Economics, Elsevier, vol. 150(2).
    12. Heitor Almeida & Murillo Campello & Michael S. Weisbach, 2004. "The Cash Flow Sensitivity of Cash," Journal of Finance, American Finance Association, vol. 59(4), pages 1777-1804, August.
    13. Heyden, Kim J. & Heyden, Thomas, 2021. "Market reactions to the arrival and containment of COVID-19: An event study," Finance Research Letters, Elsevier, vol. 38(C).
    14. Torben Pedersen & Steen Thomsen, 2003. "Ownership Structure and Value of the Largest European Firms: The Importance of Owner Identity," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 7(1), pages 27-55, March.
    15. Rouatbi, Wael & Demir, Ender & Kizys, Renatas & Zaremba, Adam, 2021. "Immunizing markets against the pandemic: COVID-19 vaccinations and stock volatility around the world," International Review of Financial Analysis, Elsevier, vol. 77(C).
    16. Tarcisio da Graca & Robert Masson, 2012. "More power to you: properties of a more powerful event study methodology," Review of Accounting and Finance, Emerald Group Publishing Limited, vol. 11(2), pages 166-183, May.
    17. Chun-Ping Chang & Gen-Fu Feng & Mingbo Zheng, 2021. "Government Fighting Pandemic, Stock Market Return, and COVID-19 Virus Outbreak," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 57(8), pages 2389-2406, June.
    18. Maneenop, Sakkakom & Kotcharin, Suntichai, 2020. "The impacts of COVID-19 on the global airline industry: An event study approach," Journal of Air Transport Management, Elsevier, vol. 89(C).
    19. Czerny, Achim I. & Fu, Xiaowen & Lei, Zheng & Oum, Tae H., 2021. "Post pandemic aviation market recovery: Experience and lessons from China," Journal of Air Transport Management, Elsevier, vol. 90(C).
    20. Min Liu & Wei-Chong Choo & Chien-Chiang Lee, 2020. "The Response of the Stock Market to the Announcement of Global Pandemic," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 56(15), pages 3562-3577, December.
    21. Dube, Kaitano & Nhamo, Godwell & Chikodzi, David, 2021. "COVID-19 pandemic and prospects for recovery of the global aviation industry," Journal of Air Transport Management, Elsevier, vol. 92(C).
    22. Acharya, Sankarshan, 1993. "Value of Latent Information: Alternative Event Study Methods," Journal of Finance, American Finance Association, vol. 48(1), pages 363-385, March.
    23. Fama, Eugene F, et al, 1969. "The Adjustment of Stock Prices to New Information," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 10(1), pages 1-21, February.
    24. Ding, Wenzhi & Levine, Ross & Lin, Chen & Xie, Wensi, 2021. "Corporate immunity to the COVID-19 pandemic," Journal of Financial Economics, Elsevier, vol. 141(2), pages 802-830.
    25. Hao Xiong & Zuofeng Wu & Fei Hou & Jun Zhang, 2020. "Which Firm-specific Characteristics Affect the Market Reaction of Chinese Listed Companies to the COVID-19 Pandemic?," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 56(10), pages 2231-2242, August.
    26. Fama, Eugene F, 1991. "Efficient Capital Markets: II," Journal of Finance, American Finance Association, vol. 46(5), pages 1575-1617, December.
    27. Brown, Stephen J. & Warner, Jerold B., 1985. "Using daily stock returns : The case of event studies," Journal of Financial Economics, Elsevier, vol. 14(1), pages 3-31, March.
    28. Salisu, Afees A. & Vo, Xuan Vinh, 2020. "Predicting stock returns in the presence of COVID-19 pandemic: The role of health news," International Review of Financial Analysis, Elsevier, vol. 71(C).
    29. Titman, Sheridan & Wessels, Roberto, 1988. " The Determinants of Capital Structure Choice," Journal of Finance, American Finance Association, vol. 43(1), pages 1-19, March.
    30. Malighetti, Paolo & Meoli, Michele & Paleari, Stefano & Redondi, Renato, 2011. "Value determinants in the aviation industry," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 47(3), pages 359-370, May.
    31. Ashraf, Badar Nadeem, 2020. "Economic impact of government interventions during the COVID-19 pandemic: International evidence from financial markets," Journal of Behavioral and Experimental Finance, Elsevier, vol. 27(C).
    32. Jeffrey M. Wooldridge, 2003. "Cluster-Sample Methods in Applied Econometrics," American Economic Review, American Economic Association, vol. 93(2), pages 133-138, May.
    33. Abate, Megersa & Christidis, Panayotis & Purwanto, Alloysius Joko, 2020. "Government support to airlines in the aftermath of the COVID-19 pandemic," Journal of Air Transport Management, Elsevier, vol. 89(C).
    34. Brown, Stephen J. & Warner, Jerold B., 1980. "Measuring security price performance," Journal of Financial Economics, Elsevier, vol. 8(3), pages 205-258, September.
    35. Opler, Tim C & Titman, Sheridan, 1994. "Financial Distress and Corporate Performance," Journal of Finance, American Finance Association, vol. 49(3), pages 1015-1040, July.
    36. HaiYue Liu & Yile Wang & Dongmei He & Cangyu Wang, 2020. "Short term response of Chinese stock markets to the outbreak of COVID-19," Applied Economics, Taylor & Francis Journals, vol. 52(53), pages 5859-5872, November.
    37. Tretheway, Michael W. & Markhvida, Kate, 2014. "The aviation value chain: Economic returns and policy issues," Journal of Air Transport Management, Elsevier, vol. 41(C), pages 3-16.
    38. Mazur, Mieszko & Dang, Man & Vega, Miguel, 2021. "COVID-19 and the march 2020 stock market crash. Evidence from S&P1500," Finance Research Letters, Elsevier, vol. 38(C).
    39. A. Craig MacKinlay, 1997. "Event Studies in Economics and Finance," Journal of Economic Literature, American Economic Association, vol. 35(1), pages 13-39, March.
    40. Harrison Hong & Neng Wang & Jinqiang Yang, 2021. "Implications of Stochastic Transmission Rates for Managing Pandemic Risks [Comparison of deterministic and stochastic SIS and SIR models in discrete time]," The Review of Financial Studies, Society for Financial Studies, vol. 34(11), pages 5224-5265.
    41. Narayan, Paresh Kumar & Phan, Dinh Hoang Bach & Liu, Guangqiang, 2021. "COVID-19 lockdowns, stimulus packages, travel bans, and stock returns," Finance Research Letters, Elsevier, vol. 38(C).
    42. Wagner, Alexander F. & Ramelli, Stefano, 2020. "Feverish Stock Price Reactions to COVID-19," CEPR Discussion Papers 14511, C.E.P.R. Discussion Papers.
    43. Suau-Sanchez, Pere & Voltes-Dorta, Augusto & Cugueró-Escofet, Natàlia, 2020. "An early assessment of the impact of COVID-19 on air transport: Just another crisis or the end of aviation as we know it?," Journal of Transport Geography, Elsevier, vol. 86(C).
    44. Ashraf, Badar Nadeem, 2020. "Stock markets’ reaction to COVID-19: Cases or fatalities?," Research in International Business and Finance, Elsevier, vol. 54(C).
    45. McQueen, Grant & Roley, V Vance, 1993. "Stock Prices, News, and Business Conditions," The Review of Financial Studies, Society for Financial Studies, vol. 6(3), pages 683-707.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Kotcharin, Suntichai & Maneenop, Sakkakom & Jaroenjitrkam, Anutchanat, 2023. "The impact of government policy responses on airline stock return during the COVID-19 crisis," Research in Transportation Economics, Elsevier, vol. 99(C).
    2. Tanrıverdi, Gökhan & Ecer, Fatih & Durak, Mehmet Şahin, 2022. "Exploring factors affecting airport selection during the COVID-19 pandemic from air cargo carriers’ perspective through the triangular fuzzy Dombi-Bonferroni BWM methodology," Journal of Air Transport Management, Elsevier, vol. 105(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Martins, António Miguel & Correia, Pedro & Gouveia, Ricardo, 2023. "Russia-Ukraine conflict: The effect on European banks’ stock market returns," Journal of Multinational Financial Management, Elsevier, vol. 67(C).
    2. Rouatbi, Wael & Demir, Ender & Kizys, Renatas & Zaremba, Adam, 2021. "Immunizing markets against the pandemic: COVID-19 vaccinations and stock volatility around the world," International Review of Financial Analysis, Elsevier, vol. 77(C).
    3. Heyden, Kim J. & Heyden, Thomas, 2021. "Market reactions to the arrival and containment of COVID-19: An event study," Finance Research Letters, Elsevier, vol. 38(C).
    4. Kotcharin, Suntichai & Maneenop, Sakkakom & Jaroenjitrkam, Anutchanat, 2023. "The impact of government policy responses on airline stock return during the COVID-19 crisis," Research in Transportation Economics, Elsevier, vol. 99(C).
    5. Maneenop, Sakkakom & Kotcharin, Suntichai, 2020. "The impacts of COVID-19 on the global airline industry: An event study approach," Journal of Air Transport Management, Elsevier, vol. 89(C).
    6. Sakawa, Hideaki & Watanabel, Naoki, 2023. "The impact of the COVID-19 outbreak on Japanese shipping industry: An event study approach," Transport Policy, Elsevier, vol. 130(C), pages 130-140.
    7. Ducret, Romain, 2021. "Investors' perception of business group membership during an economic crisis : Evidence from the COVID-19 pandemic," FSES Working Papers 524, Faculty of Economics and Social Sciences, University of Freiburg/Fribourg Switzerland.
    8. Andrieș, Alin Marius & Ongena, Steven & Sprincean, Nicu, 2021. "The COVID-19 Pandemic and Sovereign Bond Risk," The North American Journal of Economics and Finance, Elsevier, vol. 58(C).
    9. Gregory, Richard Paul, 2022. "ESG scores and the response of the S&P 1500 to monetary and fiscal policy during the Covid-19 pandemic," International Review of Economics & Finance, Elsevier, vol. 78(C), pages 446-456.
    10. Aharon, David Y. & Siev, Smadar, 2021. "COVID-19, government interventions and emerging capital markets performance," Research in International Business and Finance, Elsevier, vol. 58(C).
    11. Yarovaya, Larisa & Brzeszczyński, Janusz & Goodell, John W. & Lucey, Brian & Lau, Chi Keung Marco, 2022. "Rethinking financial contagion: Information transmission mechanism during the COVID-19 pandemic," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 79(C).
    12. Gu, Tiantian & Venkateswaran, Anand & Erath, Marc, 2023. "Impact of fiscal stimulus on volatility: A cross-country analysis," Research in International Business and Finance, Elsevier, vol. 65(C).
    13. Yashraj Varma & Renuka Venkataramani & Parthajit Kayal & Moinak Maiti, 2021. "Short-Term Impact of COVID-19 on Indian Stock Market," JRFM, MDPI, vol. 14(11), pages 1-15, November.
    14. Laeven, Luc, 2022. "Pandemics, intermediate goods, and corporate valuation," Journal of International Money and Finance, Elsevier, vol. 120(C).
    15. Zhang, Wenwen & Cao, Shuo & Zhang, Xuan & Qu, Xuefeng, 2023. "COVID-19 and stock market performance: Evidence from the RCEP countries," International Review of Economics & Finance, Elsevier, vol. 83(C), pages 717-735.
    16. Cakici, Nusret & Zaremba, Adam, 2021. "Who should be afraid of infections? Pandemic exposure and the cross-section of stock returns," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 72(C).
    17. Perote, Javier & Vicente-Lorente, José D. & Zuñiga-Vicente, Jose Angel, 2023. "How reactive is investment in US green bonds and ESG-eligible stocks in times of crisis? Exploring the COVID-19 crisis," Finance Research Letters, Elsevier, vol. 53(C).
    18. Tim Loughran & Bill McDonald, 2023. "Management disclosure of risk factors and COVID-19," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 9(1), pages 1-9, December.
    19. Silva, Thiago Christiano & Wilhelm, Paulo Victor Berri & Tabak, Benjamin Miranda, 2022. "The role of non-critical business and telework propensity in international stock markets during the COVID-19 pandemic," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 79(C).
    20. Kamal, Javed Bin & Wohar, Mark, 2023. "Heterogenous responses of stock markets to covid related news and sentiments: Evidence from the 1st year of pandemic," International Economics, Elsevier, vol. 173(C), pages 68-85.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jaitra:v:105:y:2022:i:c:s0969699722001004. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.journals.elsevier.com/journal-of-air-transport-management/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.