COVID‐19 outbreak and sectoral performance of the Australian stock market: An event study analysis

Abstract

The outbreak of COVID‐19 has weakened the economy of Australia and its capital market since early 2020. The overall stock market has declined. However, some sectors become highly vulnerable while others continue to perform well even in the crisis period. Given this new reality, we seek to investigate the initial volatility and the sectoral return. In this study, we analyse data for eight sectors such as, transportation, pharmaceuticals, healthcare, energy, food, real estate, telecommunications and technology of the Australian stock market. In doing so, we obtain data from Australian Securities Exchange (ASX) and analysed them based on ‘Event Study’ method. Here, we use the 10‐days window for the event of official announcement of the COVID‐19 outbreak in Australia on 27 February 2020. The findings of the study show that on the day of announcement, the indices for food, pharmaceuticals and healthcare exhibit impressive positive returns. Following the announcement, the telecommunications, pharmaceuticals and healthcare sectors exhibit good performance, while poor performance is demonstrated by the transportation industry. The findings are vital for investors, market participants, companies, private and public policymakers and governments to develop recovery action plans for vulnerable sectors and enable investors to regain their confidence to make better investment decisions.

How COVID-19 impacts Vietnam’s banking stocks: An event study method

“…The regression results according to formula (1) serve as a basis for calculating abnormal profits according to formula (2), and the results of the significance level t-test are shown in Table 1. To do the research, first of all, the paper calculates the extraordinary profit (AR) and the cumulative extraordinary profit (CAR) at the event windows for each event.…”

“…Therefore, the abnormal return before and after February 13, 2020, when it was announced that Vinh Phuc-Vietnam province was blocked, continuously changed the signals. The abnormal returns of the banking stock index AR [-4] and AR[-3] are both negative; AR increases when the event dates (AR[-2] and AR [2] are both positive, then AR decreases again when (AR [5] and AR [6] are both negative. As for the event on March 30, 2020, Vietnam announced the nationwide epidemic of COVID-19, and immediately after implementing the lockdown, investors seemed to have anticipated the negative impact of this event.…”

“…where  i α and  i β are the estimated coefficients of stock i from equation (2). AR it recognizes the impact of the event when information on the three events mentioned above is released to the market.…”

“…He et al (2020) pointed out that the COVID-19 pandemic severely affected traditional Chinese industries (transportation, mining, electricity and heating and the environment) but it creates opportunities for high-tech sectors to flourish, such as manufacturing industries, information technology, education and healthcare. Alam et al (2020) showed that on February 27, 2020, announcing the COVID-19 outbreak in Australia, the food, pharmaceutical and healthcare industries showed abnormal returns, impressively positive. However, after the 10-day event window announcement, the transport sector was poor, while the telecommunications, pharmaceutical and healthcare industries performed well (Alam et al, 2020).…”

The impact of COVID‐19 on the technology sector: The case of TATA Consultancy Services

“…On the other hand, the logistics‐technology industry faces delays in shipments of electronic goods and movement control regulations. Many small technology companies have to stop doing business (Alam, Wei, & Wahid, 2020). Besides, pandemic expected to affect a huge and long‐term impact on biometrics companies and related technology developers and markets (Carlaw, 2020).…”