Mixed reactions of Africa regional stock markets to COVID-19 pandemic: events study analysis

Abstract

COVID-19 has caused severe disruptions in global economic activities, and its impacts on stock markets cannot be overemphasized. The study employs market model and event study approach with four events (WHO announcement of COVID-19 as a global health emergency, confirmed infections, confirmed deaths, and vaccination) to examine the reactions of four African regional blocs’ markets to the pandemic from September 1, 2019, to August 31, 2021, to estimate the average abnormal returns of each regional bloc. On the day of the WHO announcement, we document insignificant negative average abnormal returns in the Northern bloc. We also document significant negative average abnormal returns for infections in all but the Northern bloc on the event day. The Western bloc generated the highest significant negative average abnormal return (-43 per cent) on the day COVID-19 death was confirmed on the continent. We finally document insignificant average abnormal returns from weeks 1 to 20 after the first vaccination in the Northern and Eastern blocs. The study recommends that investors, portfolio managers, and speculators not panic during similar pandemics since they can generate significant abnormal returns and diversify their investment holdings across the four regional blocs in Africa, as demonstrated by the COVID-19 pandemic.