Why is the stock market soaring? Our findings confirm that COVID-19 had negative but limited impact on stock markets. In the same month, ‘Sneezy Money’ (The Economist 2020b) notes that ‘One of the ways virus damages the economy is to interfere with the supply of labour, goods and services. Furthermore, huge drops are observed in the stock markets of the countries that had not yet been severely affected by the virus. All content of the Dow Jones branded indices Copyright S&P Dow Jones Indices LLC 2018 and/or its affiliates. Chen, Jang, and Kim (2007) study the impact of the SARS outbreak on the performance of hotel stocks in exchanges of the Chinese mainland and Taiwan and find a significant negative impact. By contrast, workers unemployed or put on furlough because of coronavirus are likely to resume their former positions. ID w26945 DOI 10.3386/w26945 Issue Date April 2020. China, Who Moves Markets in a Sudden Marketwide Crisis? In the midst of this global spread, China’s stock market has borne a glancing blow due to the spill-over effect. And the passing of the weekend dimmed hopes of a new stimulus deal, which is. Finally, because there is no stock index in Iran, and other commodity indices cannot be compared horizontally in this paper, Iran is removed from the list of countries. According to Chen and Siems (2004), the t-statistics essentially test the significance of the economic impact of an event on the capital market as measured by the deviation of index returns from their average. There is no evidence that COVID-19 has a negative impact on the major stock indices in these countries compared with the S&P 1200 Global Index. A report titled ‘What is the Root Cause of the Continued Collapse of US Stocks?’ (Wang 2020) points out that the external trigger of the sharp decline of USA stocks is the market panic caused by the COVID-19 epidemic and Saudi Arabia’s oil price war, depicting COVID-19 as the straw that broke the camel’s back. We thank the editor and an anonymous referee for helpful comments on an earlier draft. Table 5. Goldman Sachs estimates that global GDP will contract at an annualised rate of 2.5% in the first quarter’. Using conventional t-tests and non-parametric Mann–Whitney tests, we empirically analyse daily return data from stock markets in the People’s Republic of China, Italy, South Korea, France, Spain, Germany, Japan and the United States of America. The entire period of study is divided into several sub-periods, and the main time points are related to the important events of the epidemic outside China. It is also possible that Chinese investors boosted stocks out of a heightened sense of patriotism. Disclaimer. COVID-19 has taken a toll on the US and global economy. The sentiment in the stock markets across the world is gloomy. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. Several sources of COVID-19 news, which first appeared in the press at the close of 2019, are examined to find the exact chronology of the occurrence of COVID-19. In this paper, we have two timelines for the outbreak of COVID-19 in China and the outbreak in other countries, and the stock indices in the two parallel timelines are studied respectively. SARS: A Non-event for Affected Countries’ Stock Markets?

“Fluctuation is not loss. The USA, which ranks ninth in the number of confirmed cases in the time when this paper is being written, is added.

in parentheses. We use cookies to improve your website experience. The mean returns, standard deviations, t-statistics and statistical significance levels for the pre-, short, and long event windows of the domestic timeline using the t-tests are presented in Table 1. We’ll discuss how much COVID-19 could impact the US economy and stock markets. Wall Street took a dive on Monday as coronavirus, Washington intransigence and earnings weighed on the market.

26945 April 2020, Revised June 2020 JEL No. Some Experts even compare this meltdown of economies with the “Great Depression” of the 20th Century. Scott R. Baker, Nicholas Bloom, Steven J. Davis, Kyle J. Kost, Marco C. Sammon & Tasaneeya Viratyosin. A report titled ‘Spread and Stutter’ in The Economist (2020a) emphasises that COVID-19 is a grave threat to the poise of global markets. Due to the fact that the pandemic has not been alleviated worldwide yet, we can only base our empirical research on the outbreak stage in the assigned timeline, while also providing a reference for the trend of stock markets when the situation is alleviated worldwide.

The fall is in line with the global benchmark indices as the domestic market usually tracks the major global indices and the high volatility is likely to continue in the near future. Since 10 am on 23 January, bus, metro, ferry and long-distance passenger transportation in Wuhan had been suspended. There may be several factors that make a potential pandemic-generated economic slowdown different from usual recessions. The sharp fall in commodity prices would also jeopardize the fiscal situation for countries that are major commodity exporters. Black Swan events, including terrorist attacks and epidemics, will cause shock, fear and panic among international investors and result in a sharp panic-selling response (Burch, Emery, and Fuerst 2016). The development of the epidemic up to the date when this paper was written is divided into two parallel timelines: the domestic timeline and the foreign timeline. In other words, the former pattern of economic activity can be resumed, whereas usual recessions and their aftermath entail a reconfiguration of economic activity. “This time the financial and the banking system is on firm footing. The combined bad news spooked investors, crashing its shares by more than 20% in pre-market trading, and the stock wasn’t showing any signs of improving in early trading. "prerollTemplate":"https://pubads.g.doubleclick.net/gampad/ads?sz=640x480&iu=/132916964/wltz.com/news/alabama-news&ciu_szs=300x250&impl=s&gdfp_req=1&env=vp&output=vast&vpos=preroll&unviewed_position_start=1&correlator=1603984554&cust_params=category=Alabama%20News%2CCheck%20It%20Out%2CGeneral%20News%2CGeorgia%20News%2CHomepage%20Big%20Stories&video_position=1&url=https%3A%2F%2Fwww.wltz.com%2F2020%2F03%2F19%2Fcovid-19s-effect-on-the-stock-market%2F&post=162811" The period from 11 March 2020 to 22 March 2020 is called the ‘short event window’, and it examines the impact of the battle with COVID-19 outside China since the outbreak. The performance of these indices during the three periods are also compared with the performance of the S&P 1200 Global Index. So far, the countries with the largest number of confirmed cases in the world include the People’s Republic of China, Italy, South Korea, France, Spain, Germany, Japan and the United States of America. During the “Asian Crisis” (1996) Sensex dipped 40 per cent in four years but recovered 115 per cent in one year. Thus, the term ‘black swan’ morphed into describing an event that occurred despite seeming impossible. The above indices are arguably the most representative indices of these countries’ stock markets in the world press. At present, we can only forecast the situation in the long event window of the timeline of selected countries according to the domestic timeline. It would appear that the impact of COVID-19 on stock markets in Europe and the USA has a spill-over effect on Chinese stock markets. Even as the spread of the disease in China has been gradually stabilised, it has started to break out in other countries. It is worth mentioning that the CSI 300 Index has a good performance over the pre-event period, which is consistent with the results shown in Panel D of Tables 1 and 2. Perme and Manevski (2019) point out that the Mann–Whitney tests’ null hypothesis is that the two random variables share the distribution. This is reflected in the frequent crashes in the share markets in all parts of the world. All content copyright of Outlook Money.com. While earnings will inject volatility in the tech sector, "on a more macro level, ongoing US stalemate over US fiscal stimulus and the rapidly spreading Covid-19 is going to determine the direction for the wider markets," said Fawad Razaqzada, market analyst at Think Markets, in a note. Another article entitled ‘Tracking the Economic Impact of COVID-19 in Real Time’ (The Economist 2020d) also points out that the modelling by academics at the Australian National University suggests that the GDP in America and Europe would be 2% lower than it would have been in the absence of a pandemic and perhaps as much as 8% lower if the rate of deaths is many times higher than expected. On 23 January, a strict blockade was imposed in Wuhan to prevent the spread of the epidemic to other areas. Fluctuations in China’s stock market may have spill-over effects on others due to the breadth and depth of interdependence among contemporary economies. With the spill-over effect on European and American countries, the indices underperformed after the epidemic, as opposed to the comparison period, in the middle and late stages.

While COVID-19’s impact on the investment management industry is not nearly as high a priority as protecting people’s health and well-being, it is still important for investment professionals to learn from these challenges. We postulate, however, that the impact on stock markets will be short-term rather than long-term. Panel B compares the mean returns of the pre-event window with the comparison period. Before we turn to the timeline of the selected countries, we first sum up our empirical investigation in the domestic timeline at the first stage. Overall, the study of the timeline of the selected countries indicates that COVID-19 negatively affected stock markets. "I think the big difference this time around [is]...there's been a tremendous amount of hope baked into the market for quite a while, and we saw some things over this weekend that hit those assumptions hard," Brad McMillan, CIO of Commonwealth Financial Network, told CNN Business. Financial markets in the US and Europe fall as concerns rise about the coronavirus impact on economic growth.

The COVID-19 virus first broke out in China and exerted a direct influence on China’s stock market. The Unprecedented Stock Market Impact of COVID-19. Returns relative to global index of foreign timeline. In the short event window shown in Panel C, the CSI 300 Index (1% level) and the Korea Composite Index (5% level) underperformed the comparison period. The impact of COVID-19 on the European and USA stock markets has a backflow effect on the Asian stock markets, especially on China’s stock market. The Unprecedented Stock Market Impact of COVID-19 Scott R. Baker, Nicholas Bloom, Steven J. Davis, Kyle J. Kost, Marco C. Sammon, and Tasaneeya Viratyosin NBER Working Paper No. Registered in England & Wales No. This is considered a sign of the start of an outbreak in China. Since the pandemic is not over yet, the data collected are up to 22 March 2020. All rights reserved. We’ll also see how leading institutions expect the coronavirus to impact the global economy. Recent articles explain why the stock market has plummeted. The returns on each of these indices are compared to the S&P 1200 Global Index returns for the pre-, short and long event windows.

Andersen (2020) also notes that in the research papers of formally modelling pandemic scenarios, many find a large short-run economic impact, but none of them finds a significant long-run impact, even in a very severe scenario. In the midst of this global spread, China’s stock market has borne a glancing blow due to the spill-over effect. Table 1. Specifically, the development of the COVID-19 pandemic has had a negative impact on the European and American stock markets and, as the virus spreads, the negative impact will be also further intensified. The Impact of Terrorist Attacks in G7 Countries on International Stock Markets and the Role of Investor Sentiment, Confidence Intervals for the Mann–Whitney Test, https://doi.org/10.1080/20954816.2020.1757570, https://www.morningstar.com/articles/971254/morningstars-view-the-impact-of-coronavirus-on-the-economy, https://www.economist.com/finance-and-economics/2020/02/27/markets-wake-up-with-a-jolt-to-the-implications-of-covid-19, https://espresso.economist.com/b0b9da81cf357c8884a06de8ef72bea0, https://www.economist.com/leaders/2020/03/05/the-right-medicine-for-the-world-economy, https://www.economist.com/united-states/2020/03/14/tracking-the-economic-impact-of-covid-19-in-real-time, http://news.cnstock.com/news,bwkx-202003-4507256.htm, https://www.who.int/docs/default-source/coronaviruse/transcripts/ihr-emergency-committee-for-pneumonia-due-to-the-novel-coronavirus-2019-ncov-press-briefing-transcript-30012020.pdf?sfvrsn=c9463ac1_2, https://www.who.int/docs/default-source/coronaviruse/transcripts/who-audio-emergencies-coronavirus-press-conference-full-and-final-11mar2020.pdf?sfvrsn=cb432bb3_2, Medicine, Dentistry, Nursing & Allied Health, Panel A: comparison period from 1 June 2019 to 2 January 2020, Panel B: pre-event window from 3 January2020 to 22 January 2020, Panel C: short event window from 23 January 2020 to 3 February 2020, Panel D: long event window from 23 January 2020 to 10 March 2020, Panel B: pre-event window from 3 January 2020 to 22 January 2020, Panel A: comparison period from 1 June 2019 to 29 January 2020, Panel B: pre-event window from 30 January 2020 to 10 March 2020, Panel C: short event window from 11 March 2020 to 22 March 2020.

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