Economic Shockwaves: Examining Stock Market Behavior in Pakistan Amidst the COVID-19 Pandemic
Keywords:COVID-19 pandemic, Stock price returns, Event studies, Average Abnormal Returns (AAR), Cumulative Average Abnormal Returns (CAAR), Efficient Market Hypothesis (EMH)
The COVID-19 pandemic sent shockwaves through global economies, particularly affecting capital markets and stock price returns across major indices. This study examines the response of various industries listed on the Pakistan Stock Exchange (PSX) to the initial COVID-19 lockdown implemented on March 23, 2020. The research evaluates stock market reactions within a 61-day event window, with a focus on Average Abnormal Returns (AAR) and Cumulative Average Abnormal Returns (CAAR). The study encompasses nine diverse industries and employs regression analysis to compute alpha and beta coefficients. Notably, the findings reveal short-lived negative impacts across industries, followed by swift recoveries, indicative of the stock market's resilience in Pakistan. Descriptive statistics highlight sector-specific characteristics, while regression results emphasize low stock return volatility. The study underscores the role of government interventions and investor confidence in mitigating the pandemic's economic impact, providing valuable insights for investors, policymakers, and researchers. This research contributes to our understanding of stock market dynamics during crises, particularly in emerging economies.
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