Stock market reaction to COVID-19 related and ECB’s unconventional monetary policy announcements
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School of Business |
Bachelor's thesis
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Authors
Date
2024
Department
Major/Subject
Mcode
Degree programme
(Mikkeli) Bachelor’s Program in International Business
Language
en
Pages
55 + 6
Series
Abstract
Objectives The main objective of this thesis is to study the stock market reaction of Eurozone market to three negative and positive announcements during COVID-19. It also evaluates the effectiveness of ECB’s unconventional monetary policy measures and assesses the variation in market response across different indices. Summary Four market cap indices, including EURO 50, and seven sector indices in Eurozone retrieved from Refinitive Eikon Datastream are the sample for this study. Event study methodology is employed to quantify the market reaction by calculating the (cumulative) abnormal returns. Extensive analysis of past literatures concerned with market reaction to COVID-19 are presented, followed by formulation of hypotheses and interpretation of findings and analysis. Conclusion The findings of this study provide some evidence that challenge the semi-strong form of Efficient Market Hypothesis (EMH) in some specific instances. The most significant market response was observed during the WHO declaration of pandemic. Notably, some cyclical sectors displayed unexpected positive returns in response to several negative news. Additionally, no clear evidence emerges to indicate that smaller cap companies were consistently more affected by unfavourable conditions than larger cap companies. Sectoral indices exhibited varying degrees if reaction across different events as expected.Description
Thesis advisor
Inci, A. CanKeywords
COVID-19, stock market reaction, event study, monetary policy, abnormal returns