Original Article

The Outbreak of COVID-19 Global Business Review

1–26
and Stock Market Responses: © 2020 IMI
Reprints and permissions:
An Event Study and Panel Data in.sagepub.com/journals-permissions-india
DOI: 10.1177/0972150920957274
Analysis for G-20 Countries journals.sagepub.com/home/gbr

Bhanwar Singh1 , Rosy Dhall1 , Sahil Narang2 and Savita Rawat3

Abstract
This study examines the impact of the COVID-19 outbreak on the stock markets of G-20 countries.
We use an event study methodology to measure abnormal returns (ARs) and panel data regression
to explain the causes of ARs. Our sample consists of indices in G-20 countries. The observed window
comprises 58 days post the COVID-19 outbreak news release in the international media, and the
estimation window consists of 150 days before the event date. We find statistically significant negative
ARs in the four sub-event windows during the 58 days. Negative ARs are significant for developing as
well as developed countries. The findings of this study reveal that cumulative average abnormal return
(CAAR) from day 0 to day 43, ranging from –0.70 per cent to –42.69 per cent, is a consequence of
increased panic in the stock markets resulting from an increased number of COVID-19 positive cases
in the G-20 countries. From day 43 to day 57, CAAR ranging from –42.69 per cent to –29.77 per
cent indicates the recovery of stock markets after a major stock price correction due to COVID-19.
Additionally, the results of panel data analysis confirm the recovery of stock markets from the negative
impact of COVID-19.

Keywords
COVID-19, pandemic disease, event study, random effect model, G-20 countries

Introduction
The extant literature provides several empirical pieces of evidence on stock market responses to the
major systemic events. The studies investigate the impact of major events, for instance, the Severe Acute
Respiratory Syndrome (SARS) pandemic disease outbreak (Chen et al., 2007, 2018; Loh, 2006), natural

1
Maharshi Dayanand University, Rohtak, Haryana, India.
2
Indian Institute of Technology Kharagpur, Kharagpur, West Bengal, India.
3
Freelance Researcher, New Delhi, India.

Corresponding author:
Bhanwar Singh, Maharshi Dayanand University, Rohtak, Haryana 124001, India.
E-mail: write2bhanwar@gmail.com
2 Global Business Review

disasters (Caporale et al., 2019; Tavor & Teitler-Regev, 2019; Wang & Kutan, 2013), corporate events
(Maitra & Dey, 2012; Ranju & Mallikarjunappa, 2019; Seal & Matharu, 2018), public news (Li, 2018;
Ormos & Vázsonyi, 2011) and political events (Beaulieu et al., 2006; Bash & Alsaifi, 2019; Ismail &
Suhardjo, 2001; Nazir et al., 2014; Shanaev & Ghimire, 2019) on the stock markets. The negative impact
of the recent coronavirus disease (COVID-19) outbreak on the world economy and capital markets is
inevitable. In the initial phase of academic research on COVID-19, studies conducted by Al-Awadhi et
al. (2020), Liu et al. (2020), Ahmar and Val (2020) and Zhang et al. (2020) witnessed a negative impact
of COVID-19 outbreak on stock markets.
COVID-19 is an infectious disease caused by a newly discovered coronavirus. As reported by the
World Health Organization (WHO), most people infected with the COVID-19 virus will experience
mild to moderate respiratory illness and recover without requiring special treatment (WHO, 2020).
The first case of COVID-19 was confirmed in Wuhan city in Central China on 31 December 2019.
Later, in January 2020, the WHO declared the COVID-19 outbreak a public health emergency of
international concern. After the 13-fold spread of the deadly COVID-19 cases outside China, the
WHO declared COVID-19 a pandemic on 11 March 2020 (Cucinotta & Vanelli, 2020). However, the
WHO guidelines on spread and cure keep changing regularly due to a lack of sufficient scientific
knowledge about COVID-19. Most recently, Banik et al. (2020) suggested that the COVID-19 fatality
rates differ across countries and factors; for instance, the public health system, population age
structure, poverty level and bacillus Calmette–Guérin (BCG) vaccination are powerful contributory
factors in determining fatality rates.
With the WHO declaration of COVID-19 as a pandemic, stock markets across the world started
plummeting. A number of COVID-19 studies investigating the stock price reactions documented the
evidence of panic trading and increased volatility in national and international stock markets. Due to
exacerbated fear and panic trading, the National Stock Exchange (NSE) and Bombay Stock Exchange
(BSE) halted trading using a circuit breaker on 13 March and 23 March 2020, two times within 15 days.
In March 2020,the US stock market witnessed the circuit breaker four times in 10 days (Economic Times,
2020). The majority of the stock markets reacted negatively to the COVID-19-induced crisis.
With the purpose of conducting a detailed investigation, in this article, we examine how the stock
markets in the G-20 countries behave in the period of the COVID-19 outbreak. To the best of our
knowledge, this study is a pioneering research work to examine the performance of financial markets
across the G-20 countries under the present conditions of the COVID-19 pandemic. The results of the
article confirm that the COVID-19 outbreak badly influences the performance of the stock markets
across developing as well as developed economies. The downfall of stock markets can partially be
attributed to a halt in economic activities and partially to the price pressure due to economic uncertainty
and exacerbated investor fear. Recovery following a downfall confirms the notion of investor overreaction
hypothesis (ORH) of De Bondt and Thaler (1985, 1987) and Boubaker et al. (2015) and challenges the
weak form of market efficiency and, in fact, semi-strong and strong forms as well. ORH indicates the
departure of stock prices from the fundamental value; therefore, this implies a hindrance in the fair
allocation and disciplinary functions of the stock markets (Baumol, 1965).
The remainder of the article is structured as follows: the second section contains a review of
relevant literature. The third section discusses the objective of the study. The fourth section includes
the rationale of the study. The fifth section explains the methodology applied in the analysis of data.
The sixth and seventh sections discuss the results of the analysis of the data. The eighth section
concludes the findings.
Singh et al. 3

Literature Review

COVID-19 and Stock Market Reaction

Most recently, Liu et al. (2020) investigated the impact of the COVID-19 outbreak on the most affected
countries’ stock markets using the event study method. They documented that the stock markets
responded negatively to the COVID-19 outbreak, which had weakened their performance. Zhang et al.
(2020) measured the general pattern of country-specific risk and systematic risk across world financial
markets in the presence of COVID-19 outbreak fear. They documented that global markets have become
highly volatile and financial market risk has increased in response to the uncertainty of market conditions.
In the case of the USA, they suggested that non-conventional policy interventions (quantitative easing)
could increase more problems for the economy. Regarding the impact of the deadly virus on financial
volatility, Albulescu (2020) documented that new confirmed cases of COVID-19 and death reported
positively influence market volatility index (VIX) both within and outside of China. Additionally, he
proposed that the higher the spread of the deadly virus in the country, the higher would be the financial
volatility in the stock market. In the context of Spanish capital markets, Ahmar and Val (2020) predicted
a short-term effect of COVID-19 on the IBEX index using the ARIMA and SutteARIMA methodology.
Based on the results, they suggested that SutteARIMA is better for predicting the impact of the
coronavirus on the stock market than ARIMA.

Linkages Between the Outbreak of Disease and Stock Market Behaviour

Several past research studies have examined the relationship between the outbreak of disease and stock
market reaction. Loh (2006) established a strong relationship between the spread of SARS and the
performance of airline stocks across the sectional financial markets of Canada, China, Hong Kong,
Singapore and Thailand. Further, she revealed that non-aviation sector stocks are less sensitive compared
to aviation sector stocks.

Table 1. Stock Market Indices in G-20 Countries

G-20
Countries Stock Exchange Indices Abbreviation Eco. Status of Country
Argentina Bolsas y Mercados S&P Merval MERV Developing Economy
Argentinos Exchange
Australia Australian Securities S&P/ASX 200 AXJO Developed Economy
Exchange
Brazil Brasil Bolsa Balcão Bovespa BVSP Developing Economy
Canada Toronto Stock Exchange S&P/TSX Composite OSPTX Developed Economy
China Shanghai Stock Exchange Shanghai Composite SSEC Developing Economy
Index
France Paris Stock Exchange CAC 40 CAC 40 Developed Economy
Germany Frankfurt Stock Exchange Deutscher GDAXI Developed Economy
Aktienindex
(Table 1 Continued)
4 Global Business Review

(Table 1 Continued)
G-20
Countries Stock Exchange Indices Abbreviation Eco. Status of Country
India National Stock Exchange Nifty 50 Nifty50 Developing Economy
of India
Indonesia Indonesia Stock Exchange IDX Composite IDXC Developing Economy
Italy BorsaItaliana FTSE MIB FTSEMIB Developed Economy
Japan Tokyo Stock Exchange Nikkei 225 NI225 Developed Economy
Mexico Mexican Stock Exchange IPC MEXICO MXX Developing Economy
Russia Moscow Exchange MOEX Russia MOEX Developed Economy
Saudi Arabia Saudi Stock Exchange Tadawul All Share TASI Developing Economy
South Africa Johannesburg Stock JSE FTSE ALL SHARE JALSH Developing Economy
Exchange INDEX
South Korea Korea Exchange KOSPI Composite KOSPI Developing Economy
Index
Turkey Borsa Istanbul BIST 100 XU100 Developing Economy
UK London Stock Exchange FTSE 100 Index FTSE100 Developed Economy
USA The New York Stock Dow Jones Industrial DJI Developed Economy
Exchange Average Index
Source: The authors.

Concerning stock market behaviour and contagious animal disease outbreaks, Pendell and Cho (2013)
found that daily returns with the smaller companies facing the largest changes in volatility. In the context
of Taiwan, Wang et al. (2013) investigated the impact of diseases, for instance, Enterovirus 71, dengue
fever, SARS and H1N1, on allied biotechnology companies’ stocks’ performance. They documented that
investors rationally evaluate the performance of biotechnology stocks during the outbreak of disease.
Lee and McKibbin (2004) documented the severe impact of the SARS epidemic on human society as
well as on financial integration. Chiang et al. (2007) investigated a high-degree correlation among the
Asian countries during periods of major events. Morales and Callaghan (2012) reported that due to
globalization, markets are becoming interdependent, and disaster in one country is likely to affect other
connected countries as well. Donadelli et al. (2017) and Zouaoui et al. (2011) documented that the
impact of a disease outbreak on an investor’s sentiment is more prominent in culturally interdependent
countries. Contagious disease outbreaks persuade a negative impact on an investor’s sentiments, which
results in wrong investment decisions and affects the prices of the stocks (Liu et al., 2020). In line with
the previous studies, we examine stock markets’ reactions to the outbreak of COVID-19 and delve into
the theory of information efficiency and ORH.
The analysis is conducted in two parts. First, we perform an event study to assess the stock market
reaction to the COVID-19 outbreak. Second, we regress abnormal returns (ARs) on the number of
confirmed cased of COVID-19, trading volume, market returns and proxies of developing and developed
economies. The number of confirmed cases accounts for direct impact of COVID-19 on the stock market;
trading volume accounts for the market activity (Bradley et al., 2001; Brau et al., 2004; Field & Hanka,
2001; Plerou et al., 2001); the performance of Dow Jones global index accounts for market return; and
proxy of developing and developed economies accounts to check whether the outbreak of coronavirus in
developing economies significantly impact the abnormal return.
Singh et al. 5

Objectives of the Study

The objective of the article is to study the reaction of stock markets across the G-20 countries to and
around the COVID-19 pandemic. Additionally, our study attempts to develop a predictive model that
examines the relationship between ARs, index return, market return, confirmed COVID-19 cases,
abnormal trading volume and status of the respective countries (developing and developed).

Rationale of the Study

Perhaps no other area of finance has been subject to such a humongous empirical investigation during
the last four decades as the behaviour of stock markets across countries (Saravanakumar, 2011). The
expanding body of literature has established the relationship between corporate events (i.e., dividend
announcement, stock split, merger, acquisition, etc.) and the reaction of stock markets but has not given
the required attention to the Black Swan events, such as terrorist attacks and epidemics, that cause shock,
fear and panic among international investors and result in a sharp panic-selling response (Burch et al.,
2016). The ongoing deadly COVID-19 outbreak has wreaked havoc all over the world, affecting
countries’ economies, as well as weakened stock markets’ performance, hurting the sentiments of stock
market participants. The G-20 countries have felt the major waves of the COVID-19 outbreak during the
study period. Hence, our article attempts to study the behaviour of indices in G-20 countries during and
around the COVID-19 pandemic.

Methodology
Event Study Methodology
In this study, the empirical work is based on the event study methodology, as we seek to reveal how
financial markets, particularly the stock markets, behave after the outbreak of the coronavirus news. The
event study methodology is considered one of the most popular and suitable methods to examine the
impact of an event on securities returns over an event period. Event studies facilitate forecasting how
securities and indices will behave in relation to the announcement of an event (Anwar et al., 2017). The
announcement of an event could have either a positive or a negative impact on the prices of stocks.
Generally, the event study methodology is used to examine the relationship between the performance of
the stock market and the occurrence of corporate events such as mergers and acquisitions, splits, stock
dividends, bonus shares, amalgamation, etc. Numerous researchers use the event study methodology to
study the impact of a non-corporate event such as the outbreak of the disease on stock markets (Chen
et al., 2017, 2018; Liu et al., 2020; Pendell & Cho, 2013).
Previous research suggested that the event study methodology is the most useful tool to estimate ARs
after the announcement of an event (Brown & Warner, 1985; MacKinlay, 1997). As proposed by Bowman
(1983), we estimate the ARs using an event study, and it includes decisions over choice of the event of
interest, the event window, the estimation window and the estimation model.

Event of Interest and Event Date

Several recent studies have attempted to investigate the short-term effect of the COVID-19 outbreak on
stock market returns (Liu et al., 2020; Nicola et al., 2020; Zhang et al., 2020); in the same way, the event
6 Global Business Review

of interest of this study is the outbreak of news about COVID-19 on Chinese media. In the first interview
about the disease outbreak, on 20 January 2020, Zhong Nanshan (expert group leader of National Health
and Fitness Commission (NHFC), China) proposed that the new coronavirus could be transmitted among
people (Liu et al., 2020). After his interview, information about transmitted diseases attracted the
attention of people and grabbed the headlines of print and electronic media around the world. Therefore,
the event date in this study is chosen as 20 January 2020, when for the first time news of the virus
appeared in the media.

Event Window
To examine the effect of COVID-19 on stock indices, the event window chosen is of 58 days, including
the 57 days after the announcement of information about the transmitted disease along with the
announcement day itself. The impact of the COVID-19 pandemic on stock returns is longer as compared
to that of corporate events. We argue that the stock markets may behave differently in different phases of
the pandemic cycle. Therefore, to examine the influence of outbreak on different periods, the entire event
window is subdivided into six event windows: (0–9), (10–20), (21–30), (31–40), (41–50), and (51–57).

Estimation Window
As shown in Figure 1, an estimation window is used to estimate the expected returns. On par with
previous research (Anwar et al., 2017; Lalwani et al., 2019), the estimation window is from the day –150
to day –1, the day prior to the event day when information about the new coronavirus floated in the stock
market, hence consisting of 150 trading days.

Estimation Model
In the first step of the event study, we calculate the daily return using Equation (1):
 Pi ,t 
Rit = ln   ×100(1)
 Pi ,t −1 
where Ri,t is the return for index i on day t, ln is the natural logarithm, Pi,t denotes the closing price for an
index i on day t, and Pi,t−1 is the closing price of index i in the previous trading day.

Event date

−150 −1 0 +1 +57

Estimation window Event window

Figure 1. Timeline for Event Study (in days)

Source: The authors.
Singh et al. 7

Equation (2) is used to derive the expected mean return for index i, where Ri,t is the daily return of
index i during the estimation window (−150 to −1).
−1
Ri 1/ N ∑ Ri ,t=
= for i 1, 2, 3, …, N (2)
−150

After deriving the expected mean return [E( R )], AR for each day for each index is calculated using
Equation (3):

ARi,t = Ri,t – R i(3)

Cumulative abnormal return (CAR) of index i over a window from t0 to t1 is calculated using Equation (4):
t1
CAR i ( t0 , t1 ) = ∑AR i ,t (4)
t = t0

Average abnormal returns (AAR) are calculated using Equation (5), where we compute the arithmetic
average of ARs for all the indices on each event day. N represents the number of indices.
N
AAR t = 1/ N ∑AR i ,t (5)
i =1

To investigate the accumulated impacts of the event during a specified time period, cumulative average
abnormal returns (CAARs) are obtained. CAAR refers to the aggregate of daily AARs for the pre-
defined event window (t0 – t1). CAAR for the pre-specified window is calculated using Equation (6):
t1
CAAR ( t0 , t1 ) = ∑AAR t (6)
t = t0

The standard deviation is calculated using the time series of AARs of the estimation period, as shown in
Equation (7):
−1
( AAR t )
σ= ∑ (AR
−150
t − AR) 2 / 150 (7)

−1
where AR = 1/ 150 ∑ AR t
−150

and
N
AR t = 1/ N ∑AR i ,t .
i =1

heck the significance of the coefficient of AAR on event day t and of CAAR for a particular event
window (t1 – t2), t-statistics are calculated as per Equations (8) and (9), respectively:

t-TestAAR = AAR / σ ( AAR t ) .(8)

CAAR t ( t 2 – t1 + 1)
t-TestCAAR = (9)
σ ( AAR t )
8 Global Business Review

Sampling and Data Collection

As the purpose of the study is to examine the impact of the COVID-19 outbreak on stock indices around
the world, we select the G-20 countries’ indices as a sample for this study (see Table 1). G-20 comprises
the most developed and developing economies. The sample comprises 19 economies’ indices (excluding
the European Union). According to media reports, G-20 countries are facing huge difficulties in
containing the spread of the novel coronavirus. Since COVID-19 is a systemic event, global indices, for
example, the Dow Jones Global Index, are also affected negatively. We use a comparison period mean-
adjusted model to compute expected returns for corresponding countries.
Data on the intra-day closing prices of G-20 countries’ indices from 18 February 2019 to 17 April
2020 were collected using the website investing.com (an open-access website that reflects real-time
stock and index prices over the world). Additionally, data on confirmed cases of coronavirus across the
G-20 countries were collected using the website ourworldindata.org (a website that offers data on
coronavirus cases around the world). Further, the entire data set was analysed using Microsoft Excel
spreadsheets and Stata.

Results and Discussion

Mean Returns of G-20 Indices
The mean returns and standard deviation corresponding to G-20 indices are shown in Table 2. In Table
2, part (A) reports the pre-event mean and standard deviation, and Part (B) reports the post-event mean
and standard deviation.
All the G-20 indices yield positive mean returns before the outbreak of COVID-19 except IDXC and
TASI, as shown in Part A. After the outbreak of the deadly coronavirus, mean returns corresponding to
G-20 indices are negative, with increased standard deviation as compared to the pre-COVID-19 period,
implying increased stock market volatility. Indices for Brazil, Argentina, Italy, Indonesia, India, Mexico,
France, Australia and the UK respond more negatively to the outbreak of the coronavirus. As the major
impact of COVID-19 was experienced in the USA and Italy after China, their stock markets reported
–0.31 per cent and –0.55 per cent mean returns, respectively, during the event window. Despite the major
outbreak of COVID-19 in China, SSEC (–0.14%) shows a relatively lower negative mean return than
major stock markets, which may be attributed to the quick remedial actions and virus containment by the
Chinese government. The outbreak of COVID-19 negatively influenced the stock markets in developing
as well as developed economies.

Table 2. Mean Returns and Standard Deviation of G-20 Indices

Developing Economies Developed Economies

No. of Event Event No. of Event Event
Indices Trading Group’s Group’s Std. Indices Trading Group’s Group’s Std.
(G-20) Days Mean (%) Dev. (%) (G-20) Days Mean (%) Dev. (%)
Part A: Pre-event period from 18-02-2019 to 19-01-2020
MERV 222 0.056 4.330 AXJO 232 0.064 0.694
BVSP 227 0.090 1.103 OSPTX 229 0.042 0.435
SSEC 227 0.049 1.135 CAC 40 233 0.071 0.800
(Table 2 Continued)
Singh et al. 9

(Table 2 Continued)
Developing Economies Developed Economies
No. of Event Event No. of Event Event
Indices Trading Group’s Group’s Std. Indices Trading Group’s Group’s Std.
(G-20) Days Mean (%) Dev. (%) (G-20) Days Mean (%) Dev. (%)
Nifty50 223 0.067 0.885 GDAXI 229 0.079 0.835
IDXC 224 –0.014 0.718 FTSEMIB 230 0.075 0.897
MXX 230 0.028 0.834 NI225 220 0.055 0.851
TASI 228 –0.006 0.937 MOEX 230 0.112 0.691
JALSH 227 0.029 0.777 FTSE100 231 0.026 0.705
KOSPI 227 0.008 0.788 DJI 231 0.054 0.728
XU100 227 0.078 1.335
Part B: During event period from 20-01-2020 to 17-04-2020
MERV 58 −0.601 4.677 AXJO 62 −0.407 3.155
BVSP 62 −0.659 4.991 OSPTX 63 −0.319 3.872
SSEC 58 −0.138 1.835 CAC 40 63 −0.483 3.204
Nifty50 60 −0.479 3.446 GDAXI 63 −0.383 3.188
IDXC 63 −0.485 2.618 FTSEMIB 63 −0.551 3.698
MXX 61 −0.454 2.209 NI225 62 −0.305 2.527
TASI 65 −0.362 2.315 MOEX 63 −0.368 2.707
JALSH 63 −0.290 3.169 FTSE100 63 −0.448 2.901
KOSPI 62 −0.261 2.865 DJI 62 −0.308 4.126
XU100 65 −0.328 2.344
Source: The authors.

Abnormal Returns of G-20 Indices

AR on the event day (the first time the breaking news about COVID-19 hit the international media) and
the next day are shown in Table 3. On the event day, stock markets in the developing countries India,
Indonesia and South Africa showed a negative AR. Similarly, stock markets in developed countries, such
as France, Italy and the UK reported a negative AR as well. We also report the ARs on the next day after
the breaking news about the coronavirus was widely telecast across world media. On t1, the event day,
all G-20 country indices reported a negative AR except Turkey’s stock market. The COVID-19 news on
international media failed to dent investor confidence in the Turkey stock market on event day t1, whereas
markets in Indonesia, Brazil, South Africa, China, South Korea, Japan, India, Italy, France and Mexico
reported negative ARs. The sell-off was uneven across stock markets, with close geographical or
economic links to China more than others. Therefore, on that day, MERV reported the highest negative
AR and IDXC lowest negative AR among all the G-20 countries. The stock markets in developing
countries bore a greater negative impact due to COVID-19 than developed countries’ markets.
10 Global Business Review

Table 3. Abnormal Return on t0 and t1

Abnormal Return (%)

Developing Economies Developed Economies
Indices (G-20) t0 t1 Indices (G-20) t0 t1
MERV 1.560 −3.823 AXJO 0.169 −0.235
BVSP 0.203 −1.676 OSPTX 0.166 −0.195
SSEC 0.621 −1.457 CAC 40 −0.432 −0.605
Nifty50 −1.067 −0.475 GDAXI 0.098 −0.019
IDXC −0.755 −0.121 FTSEMIB −0.681 −0.762
MXX 0.145 −0.620 NI225 0.078 −1.011
TASI 0.247 −0.283 MOEX 0.615 −0.436
JALSH −0.260 −1.500 FTSE100 −0.330 −0.562
KOSPI 0.492 −1.062 DJI NA −0.598
XU100 0.757 0.580
Source: The authors.
Notes: t0 = Abnormal return on event day; t1 = abnormal return on the day after event day.
Data were not available for DJI on t0.

ARs of indices in developing and developed G-20 economies are depicted in Figures 2 and 3,
respectively, from day 0 to day 57. All the indices show a high fluctuation in AR from day 0 to 57. Figure
2 shows that after the breaking news in the media, the Chinese market fluctuated more than the other
developing markets. In the case of developing economies, BVSP, IDXC, Nifty50, SSEC, XU100, MERV,
JALSH and KOSPI showed the highest variation in AR. After day 24, the stock market responded more
rapidly to the outbreak of COVID-19. High volatility is seen in the Brazil, Indonesia and India stock
markets; on the other hand, China showed less volatility in the SSEC index. The COVID-19 outbreak in
Brazil post day 33 to event day causes the high volatility in Brazilian stock market. During the event
window (0–57), the outbreak weakened the stock markets in Turkey, India and Indonesia. With respect
to developed economies, AR from day 0 to day 57 highly fluctuated. The wave of COVID-19 weakened
the stock markets in Italy, the UK, Germany, the USA and Canada. After the outbreak, on day 36 in Italy
and day 38 in the UK, the ARs of FTSEMIB and FTSE100 reported the highest negative values. After a
rapid outbreak in Europe, the Russian market (MOEX) showed high negative ARs.

Cumulative Abnormal Return of G-20 Indices

Cumulative Abnormal Return in the Event Window (0–9)
Daily ARs corresponding to G-20 indices are aggregated to derive the CAR in the coronavirus-affected
developing and developed economies (see Tables 4–9). Table 4 depicts the CAR for days 0–9 of the G-20
stock market indices. In the first 10 days of the full event window, all indices over the world generated
negative CARs because of the breaking news of the outbreak of the novel coronavirus in the media. In
the event window (0–9), the stock market of China responded most negatively to the COVID-19
outbreak. During this event window, the SSEC fell by −6.57 per cent, the highest among all the G-20
indices, which is significant at the 1 per cent level of significance. In the event window (0–9), Argentina,
Singh et al. 11

Indonesia, Brazil, South Africa, France and the UK reported significant negative CARs more than 5 per
cent. The US DJI reported a negative CAR of –4.07 per cent (significant at 10%). During this event
window, the outbreak of news about the coronavirus spread fear among stock markets around the G-20
developing and developed economies.
15.00
COVID-19 wave in
COVID-19 wave Brazil
15.00
10.00 in China
COVID-19 wave in
COVID-19 wave Brazil MERV
10.00 in China BVSP
5.00
MERV
SSEC
5.00
0.00 BVSP
(%) (%)

Nifty50
SSEC
ReturnReturn

IDXC
0.00
-5.00 Nifty50
MXX
IDXC
-5.00 TASI
-10.00 MXX
COVID-19 wave JALSH
in Turkey TASI
-10.00
-15.00 KOSPI
COVID-19 wave JALSH
in Turkey XU100
-15.00
-20.00 KOSPI
0 3 6 9 12 15 18 21 24 27 30 33 36 39 42 45 48 51 54 57 XU100
-20.00 Event window (0, 57)
0 3 6 9 12 15 18 21 24 27 30 33 36 39 42 45 48 51 54 57
Event window (0, 57)

Figure 2. Abnormal Return of Indices in Developing Economies for the Event Window (0–57)
Source: The authors.

15.00 COVID-19 wave

COVID-19 wave
in the UK in the USA
15.00
10.00 COVID-19 wave
COVID-19 wave
in the USA AXJO
in the UK
10.00
5.00 OSPTX
AXJO
CAC 40
5.00 OSPTX
0.00 GDAXI
CAC 40
(%) (%)

0.00 FTSEMIB
-5.00 GDAXI
ReturnReturn

NI225
COVID-19 wave FTSEMIB
-5.00
-10.00 in France MOEX
NI225
COVID-19 wave FTSE100
-10.00 in France MOEX
-15.00
DJI
FTSE100
COVID-19 wave
-15.00 in Italy COVID-19 wave
-20.00 DJI
in Germany
COVID-19 wave
-20.00 in Italy COVID-19 wave
-25.00 in Germany
0 3 6 9 12 15 18 21 24 27 30 33 36 39 42 45 48 51 54 57
-25.00 Event window (0, 57)
0 3 6 9 12 15 18 21 24 27 30 33 36 39 42 45 48 51 54 57
Event window (0, 57)
Figure 3. Abnormal Return of Indices in Developed Economies for the Event Window (0–57)
Source: The authors.
12 Global Business Review

Cumulative Abnormal Return in the Event Window (10–19)

Table 5 presents the performance of stock market indices in developing and developed economies over
10 trading days 10 days post the outbreak of the news. In this event window (10–19), the major stock
markets recovered and absorbed the outbreak of news of COVID-19 to some extent. SSEC, OSPTX,
GDAXI and FTSEMIB earned significant positive CARs of 4.38 per cent, 2.48 per cent, 5 per cent and
5.73 per cent, respectively. Nifty50, MXX, JALSH, KOSPI, AXJO, CAC40, NI225, FTSE100 and DJI
recovered with CARs of 0.99 per cent, 1.64 per cent, 3.10 per cent, 1.91 per cent, 2.39 per cent, 3.75 per
cent, 0.39 per cent, 1.39 per cent and 2.10 per cent, respectively. On the other hand, the indices in
Argentina, Brazil, Indonesia, Saudi Arabia, Turkey and Russia probably followed the noise trading and
panic selling that caused their negative CARs. The indices in developed economies recovered faster
during this event window (10–19) than those in developing countries.

Table 4. CAR in Event Window (0–9) for G-20 Indices

CAR
Developing Economies Developed Economies
Indices (G-20) CARi (0–9) t-Statistic Indices (G-20) CARi (0–9) t-Statistic
MERV −6.553 −1.298 AXJO −2.497 −1.049
BVSP −5.263* −1.649 OSPTX −1.905 −1.369
SSEC −6.574*** −2.631 CAC 40 −5.625** −2.180
Nifty50 −3.475 −1.208 GDAXI −4.811* −1.789
IDXC −5.859*** −2.751 FTSEMIB −4.864 −1.637
MXX −4.205 −1.523 NI225 −4.512* −1.720
TASI −3.462 −1.104 MOEX −4.863** −2.199
JALSH −5.113** −2.061 FTSE100 −5.477** −2.298
KOSPI −4.629* −1.845 DJI −4.069* −1.729
XU100 −3.750 −0.950
Source: The authors.
Notes: CAR = Cumulative normal return.
CAR is significant at: *p < 0.10; **p < 0.05; and ***p < 0.01.

Table 5. CAR in Event Window (10–19) for G-20 Indices

CAR
Developing Economies Developed Economies
Indices (G-20) CARi (10–19) t-Statistic Indices (G-20) CARi (10–19) t-Statistic
MERV −4.832 −0.957 AXJO 2.390 1.004
BVSP −0.656 −0.206 OSPTX 2.488* 1.788
SSEC 4.384* 1.754 CAC 40 3.751 1.453
Nifty50 0.992 0.345 GDAXI 5.001* 1.860
IDXC −1.346 −0.632 FTSEMIB 5.732* 1.929
MXX 1.636 0.592 NI225 0.388 0.148
(Table 5 Continued)
Singh et al. 13

(Table 5 Continued)
CAR
Developing Economies Developed Economies
Indices (G-20) CARi (10–19) t-Statistic Indices (G-20) CARi (10–19) t-Statistic
TASI −3.956 −1.261 MOEX −0.374 −0.169
JALSH 3.096 1.248 FTSE100 1.394 0.585
KOSPI 1.911 0.761 DJI 2.104 0.894
XU100 −0.964 −0.244
Source: The authors.
Notes: CAR = Cumulative normal return.
CAR is significant at: *p < 0.10.

Cumulative Abnormal Return in the Event Window (20–29)

Table 6 shows negative CARs during the event window (20–29) for all the market indices. As Figure 2
shows, the major wave of COVID-19 started in Turkey. In this event window, indices in developed
countries significantly went down, by more than –11 per cent, in Australia, France, Germany, Italy,
Japan, Russia, the UK and the USA. In developing economies, the major indices in Turkey, South Africa,
Brazil, South Korea, India and Argentina significantly decreased, by −14.35 per cent, −12.58 per cent,
−9.25 per cent, −9.65 per cent, −8.71 per cent and −8.23 per cent, respectively. In mid-March 2020, more
than 6 weeks after the Chinese leadership shut down the world’s second-largest economy to stop a
relentless coronavirus outbreak, factories started reopening and offices started to function (The New York
Times, 2020). Unlocking the economy facilitated a revival in the Chinese stock markets, and therefore
SSEC reported a CAR of −3.31 per cent, which was significantly lower than that of other countries’
indices. More specifically, during this event window, indices in developed economies responded
negatively and rapidly as the wave of coronavirus cases started in the European continent.
Cumulative Abnormal Return in the Event Window (30–39)
Table 7 shows CARs in the event window (30–39) for indices in G-20 economies. The major outbreaks
of COVID-19 in Brazil, Italy, the UK and Germany (see Figures 1 and 2), and in many other countries,
caused high volatility and fear across the world stock markets. In this event window, indices in all G-20
economies reported a significant negative CAR. Indices in developed countries reported CARs of more
than −20 per cent. The CARs for all the indices were significant at the 1 per cent level of significance.
Major outbreaks were experienced in Italy and the UK; therefore, FTSEMIB and FTSE100 reported
CARs of −33.11 per cent and −20.69 per cent, respectively, in this event window. Argentina and Brazil
responded more negatively to the spread of coronavirus in the world, as MERV and BVSP showed CARs
of −34.35 per cent and −35.87 per cent, respectively. In this event window, indices in Canada, Australia,
France, Germany, Japan, Russia, the US, India, South Korea, South Africa, Turkey and Saudi Arabia
reported CARs of −29.73 per cent, −25.00 per cent, −26.09 per cent, −26.01 per cent, −22.43 per cent,
−22.80 per cent, −20.70 per cent, −21.90 per cent, −19.02 per cent, −14.47 per cent, −12.12 per cent and
−15.50 per cent, respectively. In the case of China, SSEC reported a CAR of −10.48 per cent, which was
very low compared to that of other countries’ indices, because China had resumed its economic activities.
More specifically, in that event window, Chinese market experiences less downfall compared to other
countries stock markets.
14 Global Business Review

Table 6. CAR in Event Window (20–29) for G-20 Indices

CAR
Developing Economies Developed Economies
Indices (G-20) CARi (20–29) t-Statistic Indices (G-20) CARi (20–29) t-Statistic
MERV −8.230 −1.630 AXJO −11.349*** −4.769
BVSP −9.247*** −2.898 OSPTX −8.059*** −5.791
SSEC −3.314 −1.326 CAC 40 −14.047*** −5.443
Nifty50 −8.708*** −3.026 GDAXI −15.193*** −5.651
IDXC −7.430*** −3.489 FTSEMIB −13.369*** −4.499
MXX −6.942** −2.514 NI225 −11.927*** −4.547
TASI −6.429** −2.050 MOEX −12.337*** −5.580
JALSH −12.581*** −5.071 FTSE100 −12.140*** −5.094
KOSPI −9.653*** −3.847 DJI −12.820*** −5.447
XU100 −14.346*** −3.634
Source: The authors.
Notes: CAR = Cumulative normal return.
CAR is significant at: **p < 0.05; and ***p < 0.01.

Table 7. CAR in Event Window (30–39) for G-20 Indices

CAR
Developing Economies Developed Economies
Indices (G-20) CARi (30–39) t-Statistic Indices (G-20) CARi (30–39) t-Statistic
MERV −34.352*** −6.803 AXJO −24.997*** −10.504
BVSP −35.869*** −11.240 OSPTX −29.734*** −21.368
SSEC −10.484*** −4.195 CAC 40 −26.091*** −10.110
Nifty50 −21.899*** −7.609 GDAXI −26.009*** −9.674
IDXC −10.641*** −4.996 FTSEMIB −33.107*** −11.142
MXX −13.847*** −5.013 NI225 −22.429*** −8.551
TASI −15.497*** −4.940 MOEX −22.798*** −10.310
JALSH −14.469*** −5.832 FTSE100 −20.684*** −8.680
KOSPI −19.016*** −7.578 DJI −20.700*** −8.796
XU100 −12.124*** −3.071
Source: The authors.
Notes: CAR = Cumulative normal return.
CAR is significant at: ***p < 0.01.

Cumulative Abnormal Return in the Event Window (40–49)

In the event window (40–49), the major indices in developing and developed economies showed positive
CARs after reporting a 52-week low in stock markets (see Table 8). Moreover, indices in all developed
economies earned positive CARs. Indices in Russia, Japan, Canada and France earned statistically and
Singh et al. 15

economically significant CARs of 10.99 per cent, 5.04 per cent, 4.82 per cent and 4.83 per cent,
respectively. FTSEMIB, GDAXI, AXJO, FTSE100, and DJI reported CARs of 4.25 per cent, 3.54 per
cent, 3.04 per cent, 2.37 per cent and 2.37 per cent, respectively. However, major indices in developing
economies showed negative CARs; for instance, IDXC reported –10.70 per cent, XU100 –9.96 per cent,
MXX –6.86 per cent, Nifty50 –4.47 per cent and BVSP –3.36 per cent. On the other hand, some indices
generated positive CARs, such as those in Argentina, China, South Korea and Saudi Arabia. This window
gives some evidence of the recovery of indices, as the majority of indices showed upward-trending
CARs. These outcomes were a result of major interventions implemented by different national and
international bodies to dilute the negative impact of coronavirus around the world.
Cumulative Abnormal Return in the Event Window (50–57)
Regarding CAR in the event window (50–57), Table 8 provides evidence of the recovery of stock markets
in developing and developed economies. Further, Table 9 suggests that stock markets around the world
re-emerged after the outbreak of the coronavirus. All indices in developing as well as developed countries
showed positive CARs. Indices in Argentina, Brazil, Indonesia, Saudi Arabia, South Africa, South Korea,
Canada, Germany, Japan, Russia and the USA earned significantly positive CARs of 11.09 per cent, 6.70
per cent, 5.09 per cent, 9.36 per cent, 8.33 per cent, 5.52 per cent, 7.88 per cent, 6.45 per cent, 4.49 per
cent, 5.70 per cent and 5.88 per cent, respectively. This came as a result of major interventions
implemented by different national and international bodies during the previous event window (40–49) to
curb the COVID-19 outbreak around the world. Table 9 reports the positive sign of bringing the
economies out of the trap of the coronavirus.

Table 8. CAR in Event Window (40–49) for G-20 Indices

CAR
Developing Economies Developed Economies
Indices (G-20) CARi (40–49) t-Statistic Indices (G-20) CARi (40–49) t-Statistic
MERV 1.476 0.292 AXJO 3.040 1.278
BVSP −3.364 −1.054 OSPTX 4.815*** 3.460
SSEC 5.491** 2.197 CAC 40 4.827* 1.870
Nifty50 −4.471 −1.553 GDAXI 3.541 1.317
IDXC −10.696*** −5.022 FTSEMIB 4.252 1.431
MXX −6.869** −2.487 NI225 5.038* 1.921
TASI 1.462 0.466 MOEX 10.987*** 4.969
JALSH −2.859 −1.152 FTSE100 2.371 0.995
KOSPI 4.374* 1.743 DJI 2.366 1.005
XU100 −9.956** −2.522
Source: The authors.
Notes: CAR = Cumulative normal return.
CAR is significant at: *p < 0.10; **p < 0.05; and ***p < 0.01.
16 Global Business Review

Table 9. CAR in Event Window (50–57) for G-20 Indices

CAR
Developing Economies Developed Economies
Indices (G-20) CARi (50–57) t-Statistic Indices (G-20) CARi (50–57) t-Statistic
MERV 11.090** 2.196 AXJO 3.510 1.475
BVSP 6.704** 2.101 OSPTX 7.878*** 5.661
SSEC 0.330 0.132 CAC 40 1.532 0.594
Nifty50 4.280 1.487 GDAXI 6.455** 2.401
IDXC 5.091** 2.390 FTSEMIB 2.426 0.817
MXX 0.231 0.084 NI225 4.494* 1.713
TASI 9.360*** 2.984 MOEX 5.697*** 2.577
JALSH 8.330*** 3.358 FTSE100 2.371 0.995
KOSPI 5.530** 2.203 DJI 5.880** 2.498
XU100 4.179 1.059
Source: The authors.
Notes: CAR = Cumulative normal return.
CAR is significant at: *p < 0.10; **p < 0.05; and ***p < 0.01.

Figures 4 and 5 show the whole picture of CARs in developing and developed economies from day 0
to day 57. CARs of indices started declining with an increase in the cases of the coronavirus around the
world and continued declining till day 37 in developed and till day 38 in developing countries. After this
point, the major indices in developing and developed economies recovered.
Table 10 shows AAR and CAAR of all indices from day 0 to day 57. As seen in Table 10, AAR from
day 0 to day 38 decreased with the increase in panic among investors due to the outbreak of COVID-19
around the world. On day 1, AAR was significant at the 10 per cent level, showing the negative impact
of the coronavirus news on stock markets all over the world. On day 38, AAR was highest negative in
the entire event window (0, 57) and significant at 1% level. Daily AAR from day 23 to day 38 is
significant at different levels of significance, and AAR on most days is negative.
Further, Table 10 indicates that CAAR ranged from −0.70 per cent on day 1 to −29.77 per cent on day
57. We can divide the 57 days’ CAARs into two parts to understand the behaviour of indices all over the
world. The first part shows CAAR from day 0 to day 43, and the second part from day 44 to day 57. In
the first part, CAAR went from −0.70 per cent to −42.69 per cent, since panic among stock markets
increased as the outbreak of COVID-19 among countries increased.
In the second part, CAAR went from −42.69 per cent to −29.77 per cent, indicating the recovery of
stock markets after the major setback caused by the coronavirus. Daily CAAR from day 3 to day 57 is
significant at different levels of significance. As shown in Figure 6, stock markets recovered post event
day 42.
 30.00

Singh et20.00
al. 17
MERV
10.00
BVSP
30.00
0.00 SSEC
Return (%)

20.00 Nifty50
-10.00
IDXC
MERV
10.00
-20.00 MXX
BVSP
0.00 TASI
SSEC
-30.00 Indices
Return (%)

JALSH
Nifty50
-10.00 recovering KOSPI
-40.00 IDXC
XU100
MXX
-20.00
-50.00
0 3 6 9 12 15 18 21 24 27 30 33 36 39 42 45 48 51 54 57 TASI
-30.00 Indices
Event window (0, 57) JALSH
recovering KOSPI
-40.00
XU100
-50.00
0 3 6 9 12 15 18 21 24 27 30 33 36 39 42 45 48 51 54 57
Event window (0, 57)

Figure 4. CARs of Indices in Developing Economies from Day 0 to Day 57

Source: The authors.

20.00

10.00

AXJO
0.00
20.00 OSPTX
-10.00 CAC 40
Return (%)

10.00
GDAXI
-20.00 FTSEMIB
AXJO
0.00
NI225
OSPTX
-30.00
Indices
MOEX
-10.00 recovering CAC 40
Return (%)

FTSE100
GDAXI
-40.00
-20.00 DJI
FTSEMIB

-50.00 NI225
-30.00 0
Indices
3 6 9 12 15 18 21 24 27 30 33 36 39 42 45 48 51 54 57 MOEX
recovering
Event window (0, 57)
FTSE100
-40.00
DJI
Figure 5. CARs of Indices in Developed Economies from Day 0 to Day 57
-50.00
Source: The authors.
0 3 6 9 12 15 18 21 24 27 30 33 36 39 42 45 48 51 54 57
Event window (0, 57)
18 Global Business Review

Table 10. AARs and CAARs of Indices in G-20 Economies

EW AARt (%) tAAR-Statistic CAARt (%) tCAAR-Statistic Skewness Kurtosis

0 0.054 0.133 0.054 0.133 0.356 0.578
1 −0.757* −1.859 −0.702 −1.220 −2.034 6.028
2 −0.016 −0.039 −0.718 −1.019 0.418 −0.745
3 −0.712* −1.749 −1.430* −1.757 −0.557 0.663
4 −0.748* −1.837 −2.178** −2.393 −2.372 6.863
5 −1.587*** −3.899 −3.765*** −3.776 0.955 0.443
6 0.500 1.229 −3.264*** −3.031 0.326 0.290
7 0.128 0.314 −3.137*** −2.725 −0.412 0.374
8 −0.628 −1.544 −3.765*** −3.084 −0.270 −1.112
9 −0.841** −2.065 −4.606*** −3.578 1.102 1.042
10 0.283 0.695 −4.323*** −3.202 0.684 2.254
11 1.036** 2.544 −3.287** −2.331 −0.599 0.638
12 0.378 0.928 −2.909** −1.983 −0.390 −1.144
13 0.118 0.290 −2.791* −1.833 0.998 2.079
14 −0.175 −0.429 −2.966* −1.882 1.253 2.744
15 −0.276 −0.678 −3.241** −1.991 −0.268 2.043
16 0.318 0.783 −2.923* −1.742 −1.722 5.884
17 0.380 0.934 −2.543 −1.473 0.053 0.104
18 −0.415 −1.021 −2.959* −1.668 −2.732 9.273
19 −0.429 −1.055 −3.388* −1.861 −1.194 1.534
20 0.136 0.334 −3.252* −1.744 −0.800 2.088
21 −0.495 −1.217 −3.748** −1.963 −1.080 2.893
22 0.380 0.934 −3.367* −1.725 −0.968 0.695
23 −1.060*** −2.605 −4.427** −2.220 −0.803 −0.344
24 −0.947** −2.326 −5.374*** −2.641 0.755 1.648
25 −2.783*** −6.838 −8.157*** −3.931 −0.503 −0.256
26 −1.377*** −3.384 −9.534*** −4.508 −0.596 0.401
27 −0.846** −2.079 −10.381*** −4.820 −0.334 −0.699
28 −1.531*** −3.762 −11.912*** −5.435 1.070 0.216
29 −1.903*** −4.678 −13.816*** −6.197 0.484 −0.721
30 0.914** 2.246 −12.901*** −5.693 0.264 0.423
31 0.409 1.005 −12.492*** −5.426 −0.973 0.680
(Table 10 Continued)
Singh et al. 19

(Table 10 Continued)

EW AARt (%) tAAR-Statistic CAARt (%) tCAAR-Statistic Skewness Kurtosis

32 −0.728* −1.789 −13.220*** −5.654 −0.479 −0.429
33 −3.588*** −8.817 −16.809*** −7.083 −1.830 2.876
34 −2.752*** −6.763 −19.561*** −8.124 0.638 0.047
35 −4.260*** −10.466 −23.821*** −9.755 0.284 −1.031
36 −3.962*** −9.735 −27.783*** −11.222 −0.387 0.828
37 −0.957** −2.352 −28.741*** −11.455 0.445 1.943
38 −6.271*** −15.408 −35.012*** −13.775 0.380 −0.561
39 −0.632 −1.553 −35.644*** −13.847 −0.794 1.098
40 −4.930*** −12.115 −40.575*** −15.569 0.216 1.227
41 −0.277 −0.680 −40.852*** −15.488 −0.682 −0.079
42 −0.851** −2.091 −41.703*** −15.626 0.385 −0.792
43 −0.988** −2.427 −42.691*** −15.813 −0.313 1.631
44 2.725*** 6.696 −39.966*** −14.638 −0.214 −0.734
45 0.237 0.582 −39.729*** −14.392 0.682 −0.413
46 4.129*** 10.146 −35.600*** −12.758 0.004 −0.959
47 0.883** 2.170 −34.716*** −12.312 0.054 0.298
48 0.632 1.552 −34.085*** −11.964 −1.090 0.510
49 −0.727* −1.785 −34.811*** −12.096 0.377 −1.013
50 −0.665 −1.633 −35.476*** −12.205 −0.296 −0.976
51 0.741* 1.823 −34.734*** −11.835 −0.899 0.500
52 −0.338 −0.830 −35.072*** −11.837 1.035 1.029
53 1.801*** 4.427 −33.270*** −11.124 0.737 0.394
54 1.301*** 3.198 −31.969*** −10.591 0.383 −0.757
55 1.668*** 4.098 −30.301*** −9.949 0.129 −1.417
56 0.409 1.006 −29.892*** −9.728 −1.787 3.820
57 0.120 0.296 −29.771*** −9.605 0.307 0.898
Source: The authors.
Notes: EW = Event window; AAR = average abnormal return; CAAR = cumulative average abnormal return.
AAR and CAAR are significant at: *p < 0.10; **p < 0.05; and ***p < 0.01.

As seen in Table 11, the mean of AR, ReturnIndex and ReturnMaket all are negative after the outbreak
of the coronavirus. Therefore, we propose a panel regression analysis to find the robust results. A panel
data analysis is used to investigate whether there has been a decrease in abnormal return of index since
the outbreak of coronavirus in a country. We take the AR of index as the dependent variable, with certain
regressors for AR: confirmed cases of coronavirus, the daily return of the index, the corresponding return
20 Global Business Review

of the global index, abnormal trading volume and a developing economy dummy. In a market with
information asymmetry and noise traders, it is difficult to explain stock market returns and volatility with
the fundamentals. The heavy involvement of noise traders in the market can significantly divert asset
prices from their fundamental value (De Long et al., 1989, 1990). Chordia et al. (2001) found a significant
change in the trading volume and market liquidity around macroeconomic announcements. Similarly,
Bradley et al. (2001), Eli and Richardson (2000) and Field and Hanka (2001) found a significant
association between the trading volume and ARs around company-specific events. Trading volume
represents the market activity. A large trading volume accompanied by declining stock markets indicates
stressful selling in the markets. Hence, in line with extant literature, we include abnormal trading volume
in our panel regression model, in addition to the number of confirmed cases of COVID-19. The
developing economy dummy accounts for the difference between developed and developing countries
with respect to information efficiency, income levels and other variables that differentiate the two types
of economies. Return on index and market control for the performance of individual indices and the Dow
Jones global indices. The panel data set comprises a cross-sectional dimension (19 indices across the
G-20 countries; i = 1, 2, 3, …, 19) with a time dimension (58 trading days: t = 0, 1, 2, …, 57). A total of
1,102 observations are used to examine the relationship between the dependent and independent
variables. Therefore, we strive to examine the following relationship:

10.00
Lockdown in Italy
0.00

-10.00 US -approved
disaster declarations
Return (%)

Lockdown in China
-20.00

-30.00 Lockdown in the

UK

-40.00 Markets
Lockdown in India
recovering
-50.00
0 3 6 9 12 15 18 21 24 27 30 33 36 39 42 45 48 51 54 57
Event window (0, 57)

AAR CAAR

Figure 6. AAR and CAAR from Day 0 to Day 57

Source: The authors.
Singh et al. 21

Table 11. Descriptive Statistics

Variables AR lnconfCases ReturnIndex ReturnMarket AbTrading

Observation 1,102 1,102 1,102 1,102 986
Mean −0.484 4.289 −0.449 −0.382 565.553
Median −0.186 −0.161 −0.198 93.442 3.135
Std deviation 3.147 3.874 3.284 3.065 3569.970
Minimum −18.646 0.000 −18.541 −9.969 −7003.533
Maximum 12.903 13.231 13.023 7.967 29138.067
Source: The authors.

Empirical Results of Panel Data Regression

AR = f (lnconfCases, ReturnIndex, ReturnMarket, AbTrading, DevelopingE)

ARi,t = α + β1 lnconfCasesi,t + β2 ReturnIndexi,t + β3 ReturnMarketi,t + β4 AbTradingi,t

+ β5 DevelopingE+ εi,t(10)

where ARi,t is the AR of index i at day t, lnconfCases is the natural logarithm of confirmed coronavirus
cases in country i at day t, ReturnIndex is the daily return of index i at day t, ReturnMarket is the daily
return of Dow Jon Global Index corresponding to country-specific index i at day t, and AbTrading is the
abnormal trading volume corresponding to index i at day t. Later, we set the dummy variable DevelopingE
to group the market indices to see whether the outbreak of coronavirus in developing economies
significantly affects AR. Then, if the index belongs to developing economies, developing economy is
assigned a value of 1, and 0 otherwise.
The results’ analysis with a fixed effects model (see Table A1) does not support the dummy variable
DevelopingE. Then, we analyse the data with a random effects model; the results of the analysis with AR
as the dependent variable are given in Table 12. The constant coefficient is significant and negative,
which indicates AR will be negative in the absence of other variables. Against the expectation, the
coefficient of confirmed cases is significant and positive, which reveals the effect of the coronavirus on
ARs. As earlier discussed in Tables 8–10, the market indices are recovering. The results reported in Table
12 are consistent with the results of the event study and confirm the notion of investor ORH and the
resulting recovery in the stock markets. As expected, coefficients of the daily AR of the indices and
global index are positive, which means indices in G-20 countries are following the global index after the
outbreak of COVID-19, which indicates co-movement in the stock markets. The coefficient of dummy
variable DevelopingE is positive, implying that indices in developing economies are recovering. Further,
the coefficient of abnormal trading volume is not significant, hence not confirming any observable
pattern in trading volume with respect to the index returns.
22 Global Business Review

Table 12. Performance of Abnormal Return (random effects model)

Variables AR AR AR AR AR
Constant −0.7507**** −0.2913**** −0.2739**** −0.3674**** −0.403****
(−10.56) (−4.75) (−4.56) (−4.35) (−3.92)
lnconfCases 0.0621**** 0.0210** 0.0188* 0.0215* 0.0258*
(4.44) (2.19) (1.91) (1.95) (1.83)
ReturnIndex 0.6299**** 0.5498**** 0.5498**** 0.4754***
(6.29) (4.05) (4.04) (3.28)
ReturnMarket 0.1154 0.1150 0.1640*
(1.35) (1.35) (1.82)
DevelopingE 0.1556** 0.1853**
(2.04) (2.14)
AbTrading −0.00000463
(−0.50)
R-squared 0.0059 0.4355 0.4411 0.4417 0.4413
N 1,102 1,102 1,102 1,102 986
Source: The authors.
Notes: t-Statistics are in parentheses; they are significant at: *p < 0.10; **p < 0.05; ***p < 0.01; and ****p < 0.001.
Abnormal trading volume was not available for indices in Argentina and Russia.

Conclusion and Managerial Implications

The COVID-19 outbreak has wreaked havoc all over the world. In view of the current pandemic, the
majority of economic activities across the globe remain halted. As a result, all the major macroeconomic
indicators are showing gloomy future scenarios. The immediate effect or financial implications of
COVID-19 can be felt through stock market fluctuations.
In view of this, we analyse the impact of the COVID-19 outbreak on the stock market using an
extensive sample of G-20 countries. Our results reveal that post the COVID-19 outbreak, stock
markets all over the world performed badly and experienced negative returns, as indicated by Table
10. However, in the later stages of the event window, we discover, the stock markets were gradually
recovering from the setback of the coronavirus outbreak, as indicated by positive CARs. The results
of panel data regression also report evidence in support of the stock market recovery after the negative
impact of COVID-19. Overall, our results suggest that future uncertainty due to the COVID-19
outbreak, initially, caused panic selling in stock markets across the globe. Now, stock markets are
experiencing the influx of capital, which is facilitating their recovery. The article has practical
implications for decision-makers such as central banks, stock market regulators, investors and
government authorities. The confirmation of ORH suggests that investors make rational decisions and
central banks, stock market regulators and government officials in the G-20 countries introduce further
interventions to boost confidence among investors. Finally, markets are driven by noise trading in this
period of uncertainty. There is a need to delve into market volatility, considering the noise trading
Singh et al. 23

theory, and we suggest that this can be investigated in the coming research studies. Our study suggests
that investors could adopt long-term investment strategies in weakened market conditions, and the
suitable response would be to buy stocks.

Acknowledgement
We are thankful to Professor (Rtd.) Ajit Singh Boora, former Dean and Director, Institute of Management Studies
and Research, Maharshi Dayanand University, Rohtak, for his insights and suggestions. The authors are grateful to
the editor of Global Business Review and the anonymous referees for their extremely useful suggestions to improve
the quality of the article. All usual disclaimers apply.

Declaration of Conflicting Interests

The authors declared no potential conflicts of interest with respect to the research, authorship and/or publication of
this article.

Funding
The authors received no financial support for conducting research, authorship and/or publication of this article.

Annexure A

Table A1. Performance of Abnormal Return (fixed effect)

Variables AR AR AR AR
Constant −0.8255**** −0.3300*** −0.3055*** −0.327***
(−9.85) (−3.71) (−3.40) (−3.37)
lnconfCases 0.0796**** 0.0300** 0.0261* 0.0310*
(4.07) (2.11) (1.77) (1.99)
ReturnIndex 0.6294**** 0.5496**** 0.4747***
(6.28) (4.05) (3.30)
ReturnMarket 0.1149 0.1638*
(1.34) (1.82)
AbTrading −0.00000758
(−0.27)
R-squared 0.0059 0.4354 0.4410 0.3978
N 1102 1102 1102 986
Year control Yes Yes Yes Yes
Country control Yes Yes Yes Yes
Notes: t-Statistics are in parentheses; they are significant at: *p < 0.10; **p < 0.05; ***p < 0.01; and ****p < 0.001.
Abnormal trading volume is not available for indices in Argentina and Russia.

ORCID iDs
Sahil Narang https://orcid.org/0000-0002-0496-4072
Bhanwar Singh https://orcid.org/0000-0002-6816-8921
Rosy Dhall https://orcid.org/0000-0003-2086-8088
24 Global Business Review

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