RESEARCH PAPER

The impact of COVID-19 in stock prices

Tano Llanaj
Epoka University: Department of Banking and Finance
16 June, 2021
 ABSTRACT
This paper investigates the impact of COVID-19 on the stock return of Telefónica, S.A. from May
18th 2020 to June 17th 2021. There is little literature and prior research on the subject of the stock
market influence of Covid-19 since it is a relatively new occurrence in the world that is continually
emerging. Statistics, data, and information about the company's stock values (found at Yahoo
Finance) as well as total cases and fatalities caused by the virus (found at
https://ourworldindata.org/coronavirus-source-data) are incorporated and integrated to provide a
more accurate correlation between the two phenomena. Finally, a comparison of the effects of
COVID-19 on the stock market and comparable pandemic conditions has been made.

INTRODUCTION
The stock market is a collection of markets and exchanges where routine transactions including
buying, selling, and issuing publicly traded firm shares take place. The prices of the firms' shares
are influenced by demand and supply variables. The majority of the variables are directly tied to the
global economic condition, which experienced a severe crisis as a result of Covid19, which rocked
the whole globe.
The COVID-19 pandemic is a global pandemic caused by severe acute respiratory syndrome that is
still underway (SARS-CoV-2). As of 30 May 2021, more than 169 million cases have been
documented, with more than 3.53 million confirmed fatalities attributed to COVID-19, making it
one of the deadliest pandemics in history. The riskiness that individuals began to encounter caused
them to become confused and uneasy about their life, resulting in a lockdown that severely harmed
the economy. COVID-19 and the resulting shocks have had conflicting consequences on enterprises
all across the world. Some companies, like as internet retail chains or supermarkets, saw
tremendous growth during the pandemic, while others, such as restaurants and shopping malls, had
major declines. As a result, their stock market values fluctuate, as seen by the regression chart
below.
Telefónica, S.A. is a global Spanish telecommunications firm based in Madrid, Spain. It is one of
the world's major telephone operators and mobile network providers. It operates in Europe and the
Americas and offers fixed and mobile phone, broadband, and subscription television. In this article,
we will examine how the pandemic has affected this firm, as well as the relationship between
numerous Covid19 statistics, such as total Covid19 cases and total fatalities, and the business's
stock price from May 18th 2020 to June 17th 2021.

The remaining part of the paper is organized as follows:

• Section 2: A literature study on the impacts of COVID-19 on stock prices.
• Section 3: The methods used, as well as the variables used.
• Section 4: Empirical findings based on the analysis of these variables and the methodologies used
• Section 5: Findings from the research report
 LITERATURE REVIEW
The investigations looked into and evaluated the association between Covid-19 and the stock
market. They concluded that the pandemic affected the stock market in terms of price volatility,
expected return, and uncertainty. Below are some remarks from researchers about this issue.
Liu et al. (2020) evaluated the effects of the COVID-19 pandemic on financial markets in the most
afflicted nations, revealing that stock markets had reacted unfavorably to the COVID-19 epidemic,
resulting in a decline in performance.
In the face of COVID-19 outbreak fear, Zhang et al. (2020) looked at the broad pattern of country-
specific risk and systematic risk across global financial markets.
According to the International Labour Organization, global unemployment will grow by roughly 25
million by 2020 (Mc Kibbinand Fernando, 2020). (ILO, 2020). As firms lose workers due to
unemployment, their purchasing power dwindles, and stock values plummet.

DATA AND METHODOLOGY

Telefónica, S.A. is a global Spanish telecommunications firm based in Madrid, Spain. It is
one of the world's major telephone operators and mobile network providers.The data for this
research is gathered from 18th of May 2020 to 17th of June 2021.
The website https://ourworldindata.org/coronavirus-source-data is used to collect
information related to the total deaths and total cases data for France and then entering them
into an Excel table. The above-mentioned growth is then determined using the formula (Gt-
G t-1)/Gt-1.

EViews 10 is used to calculate the interrelation of the variables for the statistics.
  Detailed data about the relationship between close prices, total cases and total deaths.

Table 1.

CLOSE TOTAL_CASES TOTAL_DEATHS

 Mean  4.365413  1753008.  48512.19
 Median  4.475000  1638198.  44868.50
 Maximum  5.520000  3647520.  79711.00
 Minimum  3.320000  241966.0  27136.00
 Std. Dev.  0.463972  1237887.  19154.40
 Skewness -0.396573  0.188070  0.395740
 Kurtosis  2.529800  1.461187  1.574491

 Jarque-Bera  8.572547  25.30340  26.80673

 Probability  0.013756  0.000003  0.000002

 Observations  242  242  242

 A graph that shows the fluctuations of the stock prices over the given period of time.
 The correlation between the stock return and the growth of total cases. This correlation is

important to build the regression model equation.

Dependent Variable: STOCK_RETURN

Method: Least Squares
Date: 06/10/21 Time: 22:15
Sample (adjusted): 2 242
Included observations: 241 after adjustments

Variable Coefficient Std. Error t-Statistic Prob.  

GROWTH_OF_TOTAL_CASES 0.023085 0.131690 0.175297 0.8610

C -0.000551 0.002171 -0.253777 0.7999

R-squared 0.000129     Mean dependent var -0.000288

Adjusted R-squared -0.004055     S.D. dependent var 0.024306
S.E. of regression 0.024355     Akaike info criterion -4.583897
Sum squared resid 0.141766     Schwarz criterion -4.554978
Log likelihood 554.3596     Hannan-Quinn criter. -4.572246
F-statistic 0.030729     Durbin-Watson stat 1.955562
Prob(F-statistic) 0.860995

 The correlation between the stock return and the growth of total deaths. This correlation is

important to build the regression model equation.

Dependent Variable: STOCK_RETURN

Method: Least Squares
Date: 06/10/21 Time: 22:16
Sample (adjusted): 2 242
Included observations: 241 after adjustments

Variable Coefficient Std. Error t-Statistic Prob.  

GROWTH_OF_TOTAL_DEATHS 0.283535 0.293760 0.965194 0.3354

C -0.001562 0.002048 -0.762770 0.4464

R-squared 0.003883     Mean dependent var -0.000288

Adjusted R-squared -0.000285     S.D. dependent var 0.024306
S.E. of regression 0.024309     Akaike info criterion -4.587659
Sum squared resid 0.141234     Schwarz criterion -4.558739
Log likelihood 554.8129     Hannan-Quinn criter. -4.576008
F-statistic 0.931600     Durbin-Watson stat 1.963925
Prob(F-statistic) 0.335423
 EMPIRICAL ANALYSIS
The collected and arranged data was then reviewed as follows:
There were a total of 242 observations, according to the first table. In the relationship between the
stock price, total cases, and total fatalities, we may stress the mean, maximum, and lowest values of
the variables. We may also calculate the standard deviation, which is a measure of the disparity
between values.

CLOSE TOTAL CASES TOTAL DEATHS

 Mean   4.365413  1753008.  48512.19

 Median  4.475000   1638198.  44868.50

 Maximum   5.520000  3647520.  79711.00

 Minimum   3.320000  241966.0  27136.00

 Std. Dev.  0.463972  1237887.  19154.40

About the graph of close, it shows deep fluctuations all over the focused period of time, where we
can see high increases and decreases. The lowest close value was at the 100 observation and the
highest value at the 2nd observation. Looking at the graph we can say that overall, there is an
increase in the stock close even though there can be seen decreases. The overall situation was very
unstable and as previously stated with large fluctuation.
Regarding the correlation between stock return and the growth of total cases, there is
developed a regression model:
Stock return=b0 + b1”growth total cases”
Stock return=-0.000551+0.023085*growth of total cases
There is a slight positive impact of the growth of total cases in stock return. So, if total
cases increase by 1%, stock return will increase by approximately 0.023%

Regarding the correlation between stock return an growth of total deaths

Stock return=b0 + b1”growth total cases”
Stock return=-0.001562+0.283535*growth of total cases
So, if total cases increase by 1%, stock return will increase by approximately 0.028%
 CONCLUSION
This research focuses on the impacts of the COVID-19 epidemic on Telefónica, S.A. stock prices. It
has had an influence on numerous businesses in various ways. Many businesses, including as those
in the service industry, suffered as a result of the pandemic's limits, and some even went bankrupt.
Telefónica, S.A.'s stock price increased because telephone companies and mobile network providers
are part of an economic sector that "exploded" during the epidemic.
To summarize, stock prices cannot always be predicted since external variables such as public
health or others with a significant influence might be unpredictable.
 REFERENCE LIST

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Hohler, J. H. (2020, November 27). Measuring the impact of COVID-19 on stock prices and profits

in the telecommunications chain. https://onlinelibrary.wiley.com/doi/10.1002/agr.21678

Hong, H., Bian, Z., & Lee, C. C. (2021). COVID-19 and instability of stock market performance:

evidence from the U.S. Financial Innovation, 7(1). https://doi.org/10.1186/s40854-021-

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Chen, J. C. (2021, March 20). Stock Market. Investopedia.

https://www.investopedia.com/terms/s/stockmarket.asp