COVID-19’s impact on the JSE-listed industry prices.

Abstract

This study aimed to examine the impact of the COVID-19 pandemic on the stock prices of companies listed on the Johannesburg Stock Exchange (JSE). Additionally, the study aimed to evaluate the market efficiency within select industries listed on the JSE, employing the Efficient Market Hypothesis (EMH) theory. The examination study focused on the period immediately following the announcement of lockdown measures, spanning 30 days. The fixed effect model was used to evaluate the relationship between JSE industry returns and independent variables such as COVID-19 metrics, Adjusted Share Price, and Exchange Rate over time. Further, the event study methodology was used to measure the abnormal returns on stock prices 30 days up to 30 days after the lockdown announcement and hence the efficiency of the stock market during this time. Notably, the regression analysis underscored that while the exchange rate may not wield significant influence over financial returns, the number of COVID-19 cases appears to have a statistically significant positive impact on stock prices, emphasising the pervasive influence of the pandemic on market dynamics. The event study revealed that 62.5% of the selected JSE industries exhibited support for the Efficient Market Hypothesis (EMH) theory. This suggests that a significant portion of the South African stock market demonstrates strong information efficiency. The findings suggest the importance of monitoring how the outbreak of pandemics has affected the general economy and the environment in which companies operate. Investors should be cautious during this time as there are additional risk factors such as national governments enforcing lockdown restrictions which will limit company activities. Further, the study reveals that investors who are investing in the South African stock exchange should use investment strategies that are aligned with investing in weak-form efficient markets.