Asian perspective of capital market performance amid the COVID 19 pandemic

Purpose - The purpose of this research is to investigate the short-term capital markets' reactions to the public announcement first local detection of novel corona virus (COVID 19) cases in 12 major Asian capital markets. Design/methodology/approach - Using the constant mean return model and the market model, an event study methodology has been implied to determine the cumulative abnormal returns (CARs) of 10 pre and post-event trading days. The statistical significance of the data was assessed using both parametric and nonparametric test statistics. Findings - First discovery of local COVID 19 cases had a substantial impact on all 12 Asian markets on the event day, as shown by statistically significant negative average abnormal return (AAR) and cumulative average abnormal return (CAAR). The single factor ANOVA result has also demonstrated that there is no variability among 12 regional markets in terms of short-term market responses. Furthermore, there is little evidence that these major Asian stock market indices differ significantly from the FTSE All-World Index which might suggest possible spillover impact and co-integration among the major Asian capital markets. The study further discovers that market capitalization and liquidity did not have any significant impact on market reaction to announcement. Research limitations/implications - The study's contribution might have been compromised by the absence of socio-demographic, technical, financial and other significant policy factors from the analysis. Practical implications - These findings will be considerably helpful in tackling this unprecedented epidemic issue for personal and institutional investors, industrial and economic experts, government and policymakers in assessing the market in special circumstances, diversifying risk and developing financial and monetary policy proposals. Originality/value - This paper is the first to examine the effects of local COVID 19 detection announcement on major Asian capital markets. This study will add to the literature by investigating unusual market returns generated by infectious illness outbreaks and the overall market efficiency and investors' behavioral pattern of major Asian capital markets.