Epidemics and the Chinese stock market: Assessing the unique impact of COVID-19 : A thesis submitted in partial fulfilment of the requirements for the Degree of Master of Commerce and Management at Lincoln University

Abstract

Using a sample of 4,179 listed firms from the Shanghai and Shenzhen stock exchanges, this study explores the impact of the three epidemics, SARS, H1N1, and COVID-19, on China’s stock market. The research employs an event study methodology. The primary analysis is based on the Fama-French five-factor model, and the robustness checks are conducted using the Fama-French three-factor model. Using daily data from 2001 to 2024, the study performs a multidimensional analysis of abnormal returns across epidemic stages, market sectors, industry types, and firm characteristics. The results indicate that all three epidemics negatively affected the Chinese stock market. Average Abnormal Returns (AARs) and Cumulative Average Abnormal Returns (CAARs) were significantly negative across most event windows. However, the extent of the impact varied: for example, the A-share market, private enterprises, small businesses, and highly leveraged companies showed more sensitive stock price reactions. In contrast, large firms, state-owned enterprises, and companies with low leverage demonstrated stronger market resilience. Moreover, various industries experienced distinct effects. Manufacturing, Transportation, and Real Estate experienced the largest declines during the epidemics, whereas Agriculture and Health-related sectors experienced the smallest declines, reflecting greater resilience. A comparative analysis shows that the COVID-19 pandemic had the most severe and prolonged impact, followed by H1N1, whereas SARS had a comparatively modest effect on the stock market. This study shows how capital markets respond to public health disturbances and provides empirical insights that can help assist policymakers, corporate managers, and investors in managing risk and making informed decisions during future health crises.