The Tehran Stock Exchange Reaction to Covid-19 Outbreak Announcement

While prior research on the Covid-19 effects on stock markets focused on developed countries, this study aims to examine the impact of Covid-19 on Iran’s emerging and developing market. The study sample comprised 245 companies listed on the Tehran Stock Exchange (TSE). This study uses panel-data regression models to evaluate the influence of the Covid-19 announcement on stock returns from February 12th to February 26th, 2020. The study results indicate that the announcement of the Coronavirus outbreak in Iran had not caused an abnormal return on the TSE. In examining the impact of this event on various industries, we have observed that other sectors did not show abnormal reactions through the news except for the three groups of banks, base metals, and pharmaceutical companies. Discussion and conclusion: the findings of this study suggest the poor market efficiency of TSE. Considering TSE is subject to macro-variables in the country, we have found that the metal industry in Iran converges with the global market of metals. Future research and implication: the investors should pay attention to international events affecting the metal industry, which brings new topics to focus on for future research. To investigate the long-term effect of this event on the capital market, future research is suggested to use models such as GARCH.