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Does China’s stock market react to COVID-19 differently at industry level? Evidence from China

Author

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  • Zhiwei Yang
  • Muhammad Naeem
  • Hao Ji
  • Gang Liu
  • Yuchun Zhu
  • Jia Xu

Abstract

Since the outbreak of the COVID-19 pandemic in 2020, global economic growth has been negatively affected. The reaction of financial markets was particularly dramatic, especially in countries severely affected by the outbreak. Based on Shanghai Stock Exchange (SSE) data from August 13, 2019 to December 31, 2020, this study investigates the short-term and the long-term market reactions of industry indices. The event study method and the Fama-French five-factor model are used to analyse the effect of the COVID-19 pandemic. Findings reveal that cumulative abnormal returns (CARs) in most industries followed a similar short-term trajectory. However, the excess returns of the SSE Information Technology, SSE Telecommunication Services and SSE Materials show different performance in the long term. This study facilitates the analysis of the impact of large public emergencies, such as global pandemics, on investors’ expectations and decision-making. It also helps investors to make rational decisions and the government to formulate targeted policies.

Suggested Citation

  • Zhiwei Yang & Muhammad Naeem & Hao Ji & Gang Liu & Yuchun Zhu & Jia Xu, 2023. "Does China’s stock market react to COVID-19 differently at industry level? Evidence from China," Economic Research-Ekonomska Istraživanja, Taylor & Francis Journals, vol. 36(2), pages 2143844-214, July.
    • Handle: RePEc:taf:reroxx:v:36:y:2023:i:2:p:2143844
    DOI: 10.1080/1331677X.2022.2143844
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