Nur Mardziah Aziz Jaafar, Noraini Noordin and Siti Norsafura Md Sobri

KeywordsCOVID-19, fixed effect method, panel regression, pooled ordinary least square  method, stock market returns

Abstract: The performance of stock markets can be influenced  by disasters, political events, and sports. Stock markets were affected by pandemic diseases, such as the 2002 – 2004 Severe Acute Respiratory Syndrome and the 2013 – 2016 Ebola Virus Disease.  Malaysia reported their first 17 casualties from COVID-19 on January 25 2020. They were travellers from China to Malaysia via Singapore but not many cases were confirmed before March 2020. A few more reported cases were associated with a religious gathering at a mosque in February 2020. The Movement Control Order was instituted by the Prime Minister of Malaysia beginning March 18 2020. The COVID-19 pandemic has caused damage to the business and investment market in Malaysia. Bursa Malaysia plunged to 3.33% in March 2020. Hence, it is highly essential to study the consequences of the pandemic on stock market returns.  This study aimed to determine the pandemic’s effect on stock market returns in two domains, namely the total growth of new COVID-19 cases and COVID-19 deaths. The Panel Regression Method, namely Pooled Ordinary Least Square (OLS) and fixed-effect method were applied to achieve two objectives. The first objective was to analyse the correlation of stock market returns to total COVID-19 new cases and deaths. Here, for every one confirmed case increase, stock market returns decreased by -0.045 while and for every one confirmed death increase, stock market returns decreased by -0.033. Thus, the stock market returns had significant negative relationship to the daily growth of total new cases and deaths. The second objective was to estimate the daily stock returns during the pandemic. The study’s finding showed that the estimated market returns were negatively influenced by new cases and deaths due to COVID-19. Based on the findings, investors are advised against making investment plans during the pandemic. Besides helping investors decide on future investments, the findings can be expanded in future research, by increasing the data frame, independent variables and finding the impact of more specific sector indices.

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