Airlines Stock Market Response to Stimulus Bill Expectation On March 25th, 2020 An Event Study

Abstract

The slain SARS-CoV-2 (severe acute respiratory syndrome coronavirus) negatively impacted business, industries, jobs, the economy, the stock market around the globe. The worst-hit were the travel & tourism and hospitality industries. This study examines the influence of travel ban and other restrictions during the pandemic on Airlines in the USA. The effect is evident in the stock market, the number of flights operating, and the timeline/updates from CDC affecting the industry as a whole. The market Model Event study methodology was used to a sample of 3 NYSE listed Airliners for a sample period of 64 days (start date-Feb 24th; end date-May 22nd, 2020). An event window of 64 days was observed with 22 days prior to the event and 42 days post-March 25th, 2020. Event t_1 was marked as the day when US stocks snapped back from the three-year lows ending it green as the lawmakers announced the fiscal package to combat the economic impact of COVID-19. With Dow Jones Industrial Average (DJI) gained 2,113.01 points or 11.4%, to close at 20,704.91 and the S&P 500 rose 209.93 points or 9.4% to close at 2,447.33. While the Nasdaq Composite Index closed at 7,417.86, adding 557.19 points or 8.1%.[2]. Even though we observed significantly negative Average Abnormal Returns much before and after that period, where the investors were unsure of the outcome of by the administration and had low confidence level on the economic trajectory. The AAR diagnosed during and around that period was also found positive due to the news of the Rescue Package Expectation of $2 trillion stimulus bill.