The Stock Market’s Response to

The Coronavirus
By: hamza zughiar
20200467
Abdulrahman aqel
20200530

Abstract
The COVID-19 pandemic has spread to health and the economy all across the world. This
analysis aims to succeed through eventuality studies and comparative tests of the inventory price
of goods used before or after the pandemic started. The survey included statistics on the price for
the daily stock closing and stock exchange over the previous three months and the ongoing
COVID-19 pandemic over three months, totaling 5,340 pre- and post-pandemic observational
data. The study shows that pre-and post-pandemic every-day close prices and stock market
volumes were substantially different. The theoretical and practical results of current research are
that the findings support a practical market theory, which suggests that the more knowledge, the
more competitive the market becomes.
Moreover, caution should be taken on the practical effects of investment. Investors should prefer
to sell their customers essential things, such as hospitals, the food, and beverage industries. In
order to have a long-term economic effect, further research is needed.
Keywords: Theoretical and Practical Results, Further Research, Market Response, Stock Price
and Volume, COVID-19.

Literature Review
Two of the leading US indices, The Dow Jones (DJI) and S&P 500, showed that since mid-March
2020, corporate shares in the US had fallen 20%. Also, companies' prices have decreased
considerably. The composition of stock price indices decreased in line with the investor concerns
about the problems occurred due to the pandemic on the world’s economy. This condition
continued for the next months.
Its climate influences the stock market as an economic instrument. The response of capital market
players would include microeconomic impacts, such as corporate results, business strategy
adjustments, and financial announcement or corporate dividends. Changes in the
macroeconomy, such as changes in interest and deposit-saving savings rate, foreign-currency
inflows, inflation, government-released economic control, and deregulation, affect price volatility
and capital-market commercial volume. The non-economic climate implications cannot be
differentiated from stock markets while not directly aligned with the capital market dynamics.
There are three basic types of market efficiency; weak, medium, and healthy. The market is
considered poor if historical market data and past prices represent stocks' prices and cannot
forecast future prices. A medium market shape is when the stock price is all details available to
the public. A market is robust when all the knowledge is expressed in stock prices, both public
and private. Efficient Market Hypothesis (EMH) is performed to assess weak and medium
markets. This medium market efficiency improves if investors cannot make anomalous returns
using recorded information and prices. Medium market performance is tested using sales and an
early adjustment of the company's stock price.
Investors making decisions can be guided by the knowledge contained in the case. Event
knowledge may be seen as optimistic, harmful, or normal news. Numerous customer response
studies on COVID-19 have been performed. The link between the recorded cases to the financial
system was demonstrated in March 2020, as shown by COVID-19's effect on financial markets.
The model plans to cut stock prices by 50 percent over the epidemic but rapidly recovers as the
epidemic represents a short-term labor supply shock. The best approach has shown that stock
prices have fluctuated and are underestimated at a steady pace of about 10% for half a year.
The S&P 500 was reduced by about 0.09% after a month. In forecast cases, it was reported that
inventory sales respond to unanticipated fluctuations based on standard infectious disease
models every day. It was also shown that the direction of the pandemic decreases with a decline
in stock market volatility. In cross-country environments, stock prices responded more rapidly and
robustly, while others showed that in countries with a 2003 severe outbreak of acute respiratory
syndrome, the inventories were more robust. The general outlook of the COVID-19 health-care
crisis, to be a more comprehensive economic and financial crisis from the stock market
participants' point of view. Experts objectively analyzed the effect on economic activities and stock
market indices of social distancing policies. The results illustrate the strong economic effect of
comprehensive stock market indices, rising lock-out days, monetary policy decisions, and
restrictions on international traffic closed, opened, and lowest or higher stock prices. The limits
on internal travel and higher expenditures on fiscal policy have a positive effect on economic
development.
The business remained consistent with foreign markets in general in the sense of the pandemic
outbreak. This result is consistent, which shows that changes in the financial sector's indices,
particularly the stock market, affect investor sensitivity and not on the system.
The study thus seeks to strengthen the condition's description and outcomes. Are inventory rates
significantly different from the stock market volume before and after the current COVID-19
pandemic?

Theoretical Framework
The market is favorable when the inventory price can be matched with all the data presented
thoroughly and quickly. Information includes financial and policy documents, financial, social, and
other information. The efficient description of the market examines market reactions and their
effect on healthy prices. An efficient market responds quickly to the new balance price, that is,
the information provided. In a market focused on the absorption of information, there are three
levels:
1. Weak level: If all information on price, volume, and historical benefit are expressed in the
price. However, previous inventory values cannot be used for predicting future stock
prices. Besides, the companies' liquidity ratio might be less than 1.00.

2. Medium level: If the information presented is expressed in the price of the business. Data
may include single rates, corporate data, earnings estimates, and accounting practices.
The market price would be expressed in the reception of public information from an
investor. Also, the companies' liquidity ratio must be between 1.00 and 1.50.

3. Healthy level: It is the complete opposite of a weak level, but it includes that the
companies' liquidity ratios must be over 1.50.
The Efficient Market Hypothesis (EMH) explains the knowledge responses to stock prices that
influence stock prices. The market hypothesis shows that a market can respond quickly to
knowledge. The information requested by the players in the capital market for decisions is vital to
capital markets' status. However, some information is not crucial to the operation of the stock
market.
Firstly, the accuracy of the information is sometimes unpretentious. The quality of information is
connected to the embedded material. Information from this material can be divided into
information appropriate or not crucial to the stock market's operations. Secondly, if the information
is not delivered smoothly to investors.
Experts explored the connection between the ups and downs of markets and the period for
macroeconomic and public reports. They noticed that the stock movement has a poor relation to
macroeconomic specifics and said that the stock price movements are more affected by new
inputs, new information processing, and market price.

Hypothesis Development
An investor uses the knowledge he holds when making investment decisions. Capital market
knowledge is influenced by, economically or not, the dynamics of the environment. The non-
economic climate cannot be isolated from stock-market operations but not explicitly connected to
the capital market dynamics. Many events affect market stock prices. The features of these
incidents are different. The pandemic is one by-product, not replicated every year, but can occur
at any time, with a significant effect on inventory prices.
The pandemic influenced all industries around the world, including the health and the economy.
According to the thriving market hypothesis, the efficient market hypothesis explains the stock
price's response, quick to knowledge. The information is financial and includes information from
the political, social, economic, and other aspects regarding the consumer's response to
information and the impact of security prices on the concept of an effective market.
Experts analyzed COVID-19's effect on global financial markets. They found a positive and
meaningful impact between the reported cases and the financial market. They claim that COVID-
19 has a positive and substantial impact on stock trading and stock trading volume. Based on our
argument and previous findings, our study hypotheses were as follows:
• There are significant variations between inventory prices before the pandemic.

• There are significant variations between the inventory volumes during the pandemic.

The Methodology of the Research

In this analysis, an event study was used to evaluate the customer response to an event reported
in advertising. The following sample information includes the daily closing price of the COVId-19
pandemic for up to three months from September to December 2019 following the COVID-19
outbreak and the volume of inventory shown in Fig.1 from December 2019 to March 2020. For
the precise calculation and details on the effects of information, the regular inventory price has
been used. The introduction of regular, not weekly, stock prices was an essential methodological
improvement in the event analysis, as it is one of the strengths of the present research, and three
months before and after the creation of COVID-19, the daily stock price is being observed. The
companies of client items have been chosen as the sample because they supply goods that meet
our daily needs. COVID-19 impacts on companies are being tracked.
 T1 T2 T3

September December March

2019 2019 2020

Figure 1: Observation Process

For quantitative tests, descriptive statistics and multiple regression are used. The two samples
are often used to closely inspect average differences if we believe that data is typically distributed
in the T-test pair. This test is used in repeated interventions or in the conception of corresponding
classes, where each subject is measured twice for one single variable.
Pre-design and post-design are a typical experiment of this kind. For a matched group design,
the test may be used in two conditions to serve a pair of subjects corresponding to one or more
characteristics. As these subjects are combined and not separately assigned in each group, this
design matches the group design.
If the variables are not normally distributed, Wilcoxon employs the non-parametric analysis.
Wilcoxon's signed ranking test is a non-parametric test used to calculate the critical distance
between two ordinal types of interval paired data scaling, but it does not generally assign dates.
If the standard criteria are not satisfied, the Wilcoxon signed-rank test is a further test to the T-
test.

Research Findings
There are 56 customer commodity companies, including various sub-sectors:
• 30 food and beverage companies
• nine pharmaceutical companies
• five cosmetics firms
• household goods' firms
• five tobacco companies
• four household tools
• three classified companies
There are various functionalities of each consumer product market segment. The observed data
includes regular closing of stock prices, three months before COVID-19 September 2019 and up
to 3 months after the pandemic occurred in March 2020. For a total of 5,340, we obtained 2,670
observational data ever since the pandemic.
The data showed 228 different inventory price ranks, 2,442 positive price ranks, and 0
connections based on the signed-rank test by Wilcoxon. The total number of cumulative
comments pairs is, therefore, 2,670. A negative range is less than the first group in the study with
the second group ranking. There are 228 falling stock prices, according to N's information. The
second sample score higher than the first score is a positive score, which shows that reasonable
stock prices are distributed between COVID19 and after. Following the pandemic, inventory prices
decreased to 58,057. The second performance in the category was similar to the first. The
average grade shall be the rate level, and the number of grades shall be the number of rates. The
average score of 254.64 and 1436.42 in the negatives on inventory was positive since the first
group is the pretest and the second the post-test group.
There were 279 and 2,390 results on stock trading using Wilcoxon's signed-rank test with a
negative and positive rank. The custody of the pair observer data was 2,670 observer data. The
other classification is allocated to samples in the second group with lower values than in the first
group. The inventory transaction volume fell by 279 according to the results from N. Samples of
the second group score were given a positive rating than the first group score. The beneficial
distribution of stock trading numbers before and after introducing COVID 19 was therefore
80,489.5, which suggested a decline in stock trading volume after the pandemic. The ties were
similar to the first score in the second score. The opposing average share volumes were 288.49
and 1457.17, respectively.
When calculated, the Z-score was - 43.296 based on the signed Wilcoxon rank test with p=0.000
(The risk of results obtained is at least as extreme as the statistical study results are observed,
provided the null hypothesis is valid). This value is below the essential science 0.05 and is thus
recognized in the first hypothesis. This indicates that before and after the pandemic, there is an
exhaustive inventory price difference. The effect between the COVID-19 and the inventory price
was therefore necessary. This deduction is based on the presumption that non-economic factors
such as a pandemic do not directly impact investor share prices. Stock levels are also affected.
Fig. 2 shows several companies' daily stock prices in the three months preceding and three
months following the appearance of COVID-19. Due to the statistic, each company's daily stock
price fluctuated. The regular inventory prices of several companies have been reasonably
constant three months before the appearance of COVID-19. Three months after COVID-19,
however, the stock prices of other companies dropped.

Figure 2: Daily Stock Price

The time is split into three phases: incubation, pandemic, and fever based on research findings.
From September 2019 to November 2019, the daily stock prices on the consumer goods market
remained constant, as shown in Fig. 2. The pandemic exploded in December 2019, but stock
markets had not yet been impacted by the fact that COVID-19 had not yet globalized, and there
was no market response. Fever takes place after the appearance of COVID-19 from January until
March 2020. COVID-19 experience of virus transmission news has been globalized. The
industry's response to this problem was rapid. In January 2020, the usual inventory price
decreased, as shown in Figure 2. The situation is worse because of consumer product inventory
prices. Many companies' prices dropped between February 2020 and March 2020, and price
changes after COVID-19 are recommended. Market psychology has a significant influence on
stock price movements. An extreme response can result in the psychological instability of
investors. Excessive market demand leads to the right answer, which leads to sharp stock price
rises and declines. The results show that investors were shocked, leaving investor decisions in
their business unclear. COVID-19 acts as a signal to stakeholders in investment decisions.
Investors settle upon the value of fundamental stock price measures soon and take account,
under the assumption of a relevant market hypothesis, technical analysis with daily stock prices,
and consumer psychology. A healthy economy means that stock prices represent all market
awareness.
Fig. 3 indicates that stock market levels of customer goods companies during incubation and
pandemics were constant. In the stock rate, the consumer demand impact is not essential. There
were drastic changes in the volume of stocks, up or down, as shown by stock price volumes
between January and March 2020, owing to investors' reaction to selling and buying stock. The
stock price value was immense. The news has badly shaken investors, reporting that the market
still responds to short-term developments.

Figure 3: Volume Stock Price

Even so, the economy is returning to equilibrium and is increasing in the long term. Open
innovation limits contact gaps and increases the degree of comprehension. The culture of
creativity and strategic sharing offers an accessible and productive way to provide customer
service. Innovation is an ongoing process encouraged by internal organizations. The
concentration of the researchers on open innovation needs to be enormous. The mindset and
training of employees are increasingly evolving and can be accomplished by open innovation. In
an open framework for innovation, sustainable innovation can be accomplished. The approach to
a well-known sustainable innovation would be very productive and successful.
The volume of the stock exchange is affected by COVID-19. This result corresponds to the theory
of the signal. This finding confirmed past research results that demonstrated COVID-19's positive
and substantial effects on stock price transactions. However, the results failed to help research
China's profitability and progressive growth despite the pandemic.

Conclusions
The pandemic affected the enterprise considerably. Organizations should then respond correctly
to this. In response to this pandemic, free creativity and innovation are needed. The strategic role
of Open innovation in organizations has been one of the most discussed management research
subjects in the last ten years. Open innovation will lead to improvements required for sustainability
by an organization. The survival of a business can be accomplished through open innovation.
Open innovation also improves the culture of imagination, learning, and sharing of knowledge.
Creativity would provide companies with more alternatives to deal with their issues. A culture of
learning can strengthen organizations' capacity to learn, while a culture of sharing information
enhances people's ability to face new problems.
The results revealed that daily stock closing prices and inventory volumes were significantly
different before and following the advent of COVID-19. These findings' theoretical and practical
implications have been the non-financial factor that affected stock trading prices and volumes.
Theoretically, the findings show that if the knowledge is complete, the market is more efficient.
The findings suggest that investors should pay attention when making investment decisions to
non-economic factors. Investors should favor customer goods companies because customers
demand their products. Future research should analyze the long-term economic effects of the
pandemic from predicting the survival of a business.
There are some business contexts in the current study, thus limited the generalization of the
results. Comparative studies are proposed through the use of more global samples. Other
pandemics could also be compared. However, the results for more limited applications can also
be accumulated through a longitudinal study.

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