How much and how long? The transmission of external shocks on stock market in Chinese hospitality and tourism industry

In this study, we employ the synthetic control method to evaluate the transmission of external shocks, taking COVID-19 as an example, on the stock market in the Chinese hospitality and tourism industry, specifically in the catering, hotel, cultural landscape, natural landscape, and travel agency sectors. We find an increasingly negative causal effect on stock returns in all five sectors within 1–2 days after the external shock occurred. However, this impact then gradually shrank, disappearing after 7 days. We also show that the short- and long-term causal effects of the external shock on stock volatility in the above sectors are positive and significant, due to the great uncertainty induced by the pandemic. We examine the sensitivity of stock market reactions and find that hotels are the most vulnerable among the five sectors in terms of the duration of the pandemic's negative impact. Finally, we report that larger firms in the catering and hotel sectors (compared to the other three sectors) show a greater increase in volatility. These findings provide valuable insights into financial market reactions to an external shock and offer implications for crisis management in the hospitality and tourism industry during such events.