COVID-19 and the Stock Market: Impacts on Tourism-Related Companies
The unprecedented outbreak of the coronavirus in 2020 provided an illustration of a neglected risk that brought about an economic disaster for the world. The COVID-19 pandemic, which started as a public health emergency, rapidly transformed into an econom
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COVID-19 and the Stock Market: Impacts on Tourism-Related Companies
Abstract The unprecedented outbreak of the coronavirus in 2020 provided an illustration of a neglected risk that brought about an economic disaster for the world. The COVID-19 pandemic, which started as a public health emergency, rapidly transformed into an economic crisis the world had not witnessed in over a century. In particular, the COVID-19 pandemic was a source of systematic risk, which filled global stock markets with uncertainty and resulted in big moves of share prices. Using the event study methodology that significantly utilised secondary data collection and analysis, the chapter examined the impacts of COVID-19 on tourism- related stocks. Vicissitudes in stock value were used as a signature mark for the impacts. It was observed that the news of the COVID-19 outbreak and measures put in place to curb its spread dampened the stock markets and led to declines in tourism-related stock prices. The measures included travel bans, bans on mass gatherings, as well as the closure of hotels and restaurants. Tourism firms and those in their value chain became the worst performers on global stock markets with some losing up to 80% of their value within a 2-week period. This translated into billions of dollars in lost value. Governments responded to these losses by issuing stimulus and rescue packages for distressed industries. These led to notable recoveries by some firms, although most in the tourism industry remained negative. The chapter recommends an additional rescue package for the tourism industry that must be timed with visible signs that the pandemic is under control. Keywords Tourism-related · Share price · COVID-19 · Stock markets · Volatility
13.1 Introduction When the World Health Organization (WHO) declared COVID-19 a pandemic on 11 March 2020, it warned that the disease would potentially have devastating impacts on the various markets of the world (Ramelli and Wagner 2020). COVID-19, which emerged in Wuhan, China, as a mystery illness, quickly spiralled into a global public health and economic crisis the world had not witnessed in over a century (Hassan et al. 2020). Yan (2020) argue that when a new virus outbreak occurs, no one can fully know what its long-term impact on the economy will be, as available © The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Switzerland AG 2020 G. Nhamo et al., Counting the Cost of COVID-19 on the Global Tourism Industry, https://doi.org/10.1007/978-3-030-56231-1_13
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13 COVID-19 and the Stock Market: Impacts on Tourism-Related Companies
models will have limitations in their predictive power. However, Ru et al. (2020) observe that the foremost factor when a pandemic occurs is not necessarily how bad the pandemic will be but how bad the market and investors perceive it to be. If investors perceive that a pandemic would disturb the value chain of certain firms, then the stock value of exposed firms would fall (Hassan et al. 2020). Several exi
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