Airline stock markets reaction to the COVID-19 outbreak and vaccines: An event study

António Miguel Martins; Susana Cró

doi:10.1016/j.jairtraman.2022.102281

Airline stock markets reaction to the COVID-19 outbreak and vaccines: An event study

J Air Transp Manag. 2022 Oct:105:102281. doi: 10.1016/j.jairtraman.2022.102281. Epub 2022 Aug 22.

Authors

António Miguel Martins^{1

2

3}, Susana Cró²

Affiliations

¹ University of Madeira - Faculty of Social Sciences, Caminho da Penteada, 9020-105, Funchal, Portugal.
² CEFAGE-UE and University of Évora, School of Social Sciences, Largo Dos Colegiais, 2, 7004-516, Évora, Portugal.
³ Centre of Applied Economic Studies of the Atlantic (CEEAplA), Ponta Delgada, Azores, Portugal.

Abstract

This paper examines the short-term market reaction of the airline industry to the declaration of COVID-19 as a global pandemic and to the announcements of the effectiveness of COVID-19 vaccines in the US. Using an event study, we observe a negative and statistically significant stock price reaction to the announcement of COVID-19 as a global pandemic. In contrast, we find a positive impact on the stock market due to the announcements of the effectiveness of COVID-19 vaccines in the US. These results are consistent with the investor sentiment hypothesis and the asset-pricing perspective. The empirical results also show a higher stock market reaction to the announcement of the effectiveness of the Pfizer-BioNTech COVID-19 vaccine in the US compared to the announcements of the effectiveness of subsequent vaccines. This result is explained by the innovation race competition effect and the greater reduction in investor uncertainty levels. These reactions were reinforced or mitigated by firm-specific characteristics such as liquidity, size, leverage, ownership concentration, state control and business model (i.e., low-cost versus full-service).

Keywords: Airline industry; COVID-19; Event study; Stock returns; Vaccination.