We analyzed the impact of COVID-19 on the stocks that are considered beneficiaries of pandemicof the disease. ETFs of health care stocks, bio stocks, and recession defensive stocks are usedrespectively as proxies for such stocks. We used information about COVID-19 which was releasedby Korea Disease Control and Prevention Agency (KDCA). and daily return data from KoreaExchange.
The main findings of our empirical results are as follow. First, the ETFs immediately andfully responded to the change of information regarding COVID-19 situation. Second, the stockprices of the ETFs were quite sensitive to the deterioration of COVID-19 situation, while theydid not show significant responses to the improvement of the situation. Third, information thatarrived during the closing hours was transmitted on the opening price from the closing callauction, which occurs when the exchange trading opens, and the impact of such informationmostly disappeared by the end of the regular operating hours.
The results suggest that the investors in the COVID-19 situation were actively engaged intransactions and most information released during the exchange closing hours was immediatelyand fully reflected in the opening price determined at the opening call auction. However, theimpact of information related to COVID-19 did not last long since offsetting transactions occurredduring the regular operating hours.