ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

A+| A| A-

The Impact of COVID-19 on the Stock Market and Corporate Firms

The Impact of COVID-19 on the Stock Market and Corporate Firms

This paper highlights the possible consequences of the pandemic on the stock markets. It notes that higher profitability in the past years, better growth opportunities in the stock market, and being a stand-alone firm have a favourable impact on stock price reactions to COVID-19 shocks and, hence, they make such firms more resilient.

 

Following the outbreak of COVID-19, a severe economic crisis hit the world, which appeared to be the worst since the Great Depression (Gopinath 2020). But the behaviour of the stock markets appears to be insensitive to this major crisis. From the worldwide trends of stock prices, no relationship is apparent between the severity of the pandemic as indicated by the number of COVID-19 cases and deaths and the reactions of stock markets. Thus, how far the reactions of the stock markets can be explained by economic fundamentals remains a matter of curiosity.

Krugman (2020), in one of his New York Times columns, tells us to remember three rules in this regard:

First, the stock market is not the economy. Second, the stock market is not the economy. Third, the stock market is not the economy (…). The relationship between stock performance—largely driven by the oscillation between greed and fear—and real economic growth has always been somewhere between loose and non-existent.

Dear reader,

To continue reading, become a subscriber.

Explore our attractive subscription offers.

Click here

Updated On : 2nd Dec, 2021

Comments

(-) Hide

EPW looks forward to your comments. Please note that comments are moderated as per our comments policy. They may take some time to appear. A comment, if suitable, may be selected for publication in the Letters pages of EPW.

Back to Top