Spatial tale of G-7 and BRICS stock markets during COVID-19: An event study

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The unprecedented outbreak of COVID-19 has affected every aspect of the human life, be it health, social, or economic dimensions. The anxiety and uncertainty wobbled the economies of affected countries worldwide. This study attempts to quantify the impact of COVID-19 on the performance of major stock markets of G-7 nations vis-à-vis BRICS nations. An event study methodology is employed to capture the effect of the systematic event in the form of Buy and Hold Abnormal Returns (BHAR) and Average Buy and Hold Abnormal Returns (ABHAR). The study considers a 90-day observation window, consisting of six sub-event windows after the COVID-19 news up-doves the world, and 120 days prior to the selected event date to estimate average expected returns. BHAR values in the four event windows are statistically significant, covering stock markets from panic and nosedive to their correction and recovery. ABHAR values reported are significantly negative in the event window ranging from –0.15% to –38.43% for G-7 and –0.06% to –37.12% for BRICS nations. Despite similar ABHAR trends, the BHAR values and correlation matrix exhibit a diverse reaction in BRICS nations compared to the highly synchronized reaction in the G-7 group of nations in the COVID period.

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    • Figure 1. Abnormal returns for G-7 in the observation window (0-89)
    • Figure 2. Abnormal returns for BRICS in the observation window (0-89)
    • Figure 3. ABHAR values in the observation window for G-7 and BRICS
    • Figure 4. BHAR of G-7 nations for the observation window
    • Figure 5. BHAR of BRICS nations for the observation window
    • Figure B1. Choice of ABHAR and CAAR(G-7)
    • Figure B2. Choice of CAAR and ABHAR (BRICS)
    • Table 1. List of countries, representative indices, and stock markets
    • Table 2. Mean returns and standard deviation of G-7 and BRICS
    • Table 3. BHAR in the event window (0-14) for G-7 and BRICS
    • Table 4. BHAR in the event window (15-29) for G-7 and BRICS
    • Table 5. BHAR in the event window (30-44) for G-7 and BRICS
    • Table 6. BHAR in the event window (45-59) for G-7 and BRICS
    • Table 7. BHAR in the event window (60-74) for G-7 and BRICS
    • Table 8. BHAR in the event window (75-89) for G-7 and BRICS
    • Table 9. Correlation matrix of G-7 nations in the estimation period and event window
    • Table 10. Correlation matrix of BRICS nations in the estimation period and event window
    • Table A1. ABHAR values with t-Stats for G-7 and BRICS except for China for a 90-day window
    • Table A1 (cont.). ABHAR values with t-Stats for G-7 and BRICS except for China for a 90-day window
    • Conceptualization
      Sanket Ledwani
    • Data curation
      Sanket Ledwani
    • Formal Analysis
      Sanket Ledwani
    • Investigation
      Sanket Ledwani, Suman Chakraborty
    • Methodology
      Sanket Ledwani, Suman Chakraborty
    • Project administration
      Sanket Ledwani, Sandeep S. Shenoy
    • Resources
      Sanket Ledwani, Suman Chakraborty, Sandeep S. Shenoy
    • Software
      Sanket Ledwani
    • Validation
      Sanket Ledwani, Suman Chakraborty
    • Visualization
      Sanket Ledwani
    • Writing – original draft
      Sanket Ledwani
    • Supervision
      Suman Chakraborty, Sandeep S. Shenoy
    • Writing – review & editing
      Suman Chakraborty, Sandeep S. Shenoy