Stock Market Response to Coronavirus (COVID-19) Pandemic

Abstract

Since the first day of its emergence, the novel type of coronavirus (COVID-19) has affected many areas of life. The economic and financial effects of the virus were as devastating as the damage it caused to human health. Accordingly, the aim of this study is to investigate the impact of the COVID-19 Pandemic on selected stock markets. Panel Data Analysis with structural breaks was used to identify the relationship between new case/death numbers and stock market indices. According to the results ofthe Westerlund-Edgerton Cointegration test, a break was observed in each of the stock markets included in the sample. As the break dates caused either positive or negative results in different countries, the prospects for the reasons for breaks formed either positively or negatively. The results of the analyses reveal that a significant worldwide health problem does not only affect social life and real economy, but it also causes decrease in prices in financial markets. Therefore, it may be considered by countries to take early financial measures andform some funds for pandemics. Investors may also allocate a specific portion of their portfolios to safe harbors such as gold and exchanges in this kind of panics.