Empirical analysis of relative impact of COVID-19 on sectoral stock returns in China

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Chang, Keying
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University College Cork
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Since it broke out in China in December 2019, Covid-19 has brought an unprecedented impact on every aspect of social, economic, and cultural life globally. The direct impact includes a fragile system of health-care, cut off supply chain and trade, and sharp decline in production, consumption, and investment activities. The impact of Covid-19 on the stock market performance has attracted lots of research interests in the literature. In this study, we explore the relative effects of Covid-19 on the sectoral performance of the stock market in China, using daily time series stock market data spanning 1 st Jan 2020 to 30th Dec. 2020. First, we employed the principal component analysis to derive a proxy for each sector based on its composite shares. Second, we carried out t-test to estimate whether there existed a difference between average returns before and after Wuhan lockdown due to the outbreak of Covid-19. Finally, we employed the event study methodology to investigate the impact of Wuhan lockdown on the sectoral performance of stock market in China The event study found that Wuhan lockdown have significant effects on the stock returns in China. The pandemic has adversely impacted sectors such as Public Transport, Logistic Attractions and Tourism, Hotel and Catering. However, Manufacturing, Information Technology, Education and Health-care industries have been resilient to Wuhan lockdown.
Stock return , Event study , COVID-19 , Chinese stock market , Industry sector index , Wuhan lockdown
Chang, K. 2021. Empirical analysis of relative impact of COVID-19 on sectoral stock returns in China. MSc Thesis, University College Cork.