Pandemic Fallout: Analyzing the Impact of COVID-19 on Taiwan’s Hotel Stocks
Abstract
This study attempts to evaluate Taiwanese hotel stock returns in response to the COVID-19 outbreak. This study uses data from fifteen hotel stocks from the Taiwan Capitalization Weighted Stock Index (TAIEX) and implements a t-test and event study methodology. We create the event window from December 31, 2018 to March 31, 2020, which includes the estimation period from December 31, 2018 to December 31, 2019, the pre-announcement period from January 1, 2020 to January 31, 2020 and the post-announcement period from February 1, 2020 to March 31, 2020. In January 2020, the average daily returns exhibited a distinct pattern, as all stocks witnessed negative returns following the announcement of the pandemic alert. The results indicate that hotel stocks show a negative and significant difference in the mean. Moreover, the results of the event study indicate a persistent negative impact on the selected stock. It is therefore important for policymakers to formulate pandemic outbreak strategies in advance that may help investors devise diversification strategies.
