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COVID-19 has stunned the globe and is expected to be the greatest economic disruption in the human history. The social and economic effect of the pandemic has been significant and has grabbed everyone’s attention. Since the colossal health crisis has turned into global financial crisis, therefore, the investors have experienced massive losses in a brief amount of time, the uncertainty in market has risen sharply, and the degree of risk has hit almost unparalleled heights (Zhang et al., 2020; Baker et al., 2020). The first case of COVID-19 was registered in Wuhan, China, in December 2019, and has since grown worldwide. As per World Health Organization (WHO), there are 123,419,065 confirmed cases of COVID and 2,719,163 deaths as of 23rd March, 2021 (available at https://covid19.who.int/). The Spanish flu pandemic (H1N1 virus) killed almost 40 million individuals globally in 1918, nearly a century ago. In a research by Barro et al., 2020, the death rate of Spanish flu is estimated to be higher than COVID-19, however, the economic impact of COVID-19 is projected to be much larger than Spanish flu pandemic. As stringent quarantine policies were implemented by several countries after the COVID-19 outbreak, economic activities were significantly reduced. High level of unemployment and outage of businesses may have long-term effects of COVID-19.
The pandemic has raised uncertainties and risks all over the world, impacting the world’s 20 largest economies i.e., “USA, China, Japan, Germany, India, UK, France, Italy, Brazil, Canada, Russia, South Korea, Australia, Spain Mexico, Indonesia, Netherland, Saudi Arabia, Turkey, and Switzerland” substantially. The nominal GDP of these economies adds up to 84 percent (approximately) of the global economy (International Monetary Fund, 2020) and the number of confirmed COVID-19 cases in these economies is steadily growing. Distress and panic have resulted in considerable losses for the investors. For instance, “between 24th and 28th February, 2020, the global stock market lost around US$6 trillion as a result of pandemic’s effects (Ozili and Arun, 2020). Also, after the outbreak, the market value of Standard and Poor (S&P) 500 indexes dropped by 30 percent”. Increased volatility in the market affects the desired rate of return and, as a result, the current market valuation of stocks (Azimili, 2020). Number of empirical researches on stock market reactions to huge systematic shocks are available in the literature. The previous studies have examined the impact of global events on stock market performance such as the SARS disease epidemic (Loh, 2006; Chen et al., 2007), environmental catastrophe (Wang and Kutan, 2013; Tavor and Teitler-Regev, 2019), national news (Ormos and Vazsonyi, 2011) and political events (Nazir et al., 2014; Bash and Alsaifi, 2019). The ongoing coronavirus epidemic will undoubtedly have a negative effect on the global economy and financial markets. During the early stages of studies on COVID-19 and stock market, Zhang et al., (2020), Bora and Basistha (2020), Insaidoo et al., (2020), Singh et al., (2020) found a negative effect of COVID-19 on stock markets.