Stock Abnormal Returns During the SARS Pandemic

Sammanfattning: In the 21st century, science and technology are developing rapidly, but the threats of infectious diseases caused by the fatal virus to human beings are still not eliminated. In history, outbreaks of pandemics usually seriously influenced local economic and financial markets in many ways. This thesis focuses on a pandemic that occurred more than a decade ago, SARS, to investigate the magnitude of abnormal fluctuations in the stock market of different areas at the beginning and end of the outbreak. An event study method is used to compute the abnormal returns in each country and region with SARS cases during the beginning and end of the outbreak. And the Lasso model is built by aggregate abnormal returns and seven predictors representing local economic and medical care development conditions. Among them, GDP per capita growth, Gross saving rate of GDP, hospital beds per 1000 capita, health expenditure per capita are selected by the Lasso model. Then in the cross-sectional regression, we found that health expenditure per capita and GDP per capita growth are significantly related to the magnitude of abnormal returns, and the relationships are positive.