The COVID-19 global market crash has wiped out trillions of dollars from the value of stock markets worldwide. In addition, the crash has triggered interlinked drops in commodity prices (oil hit a six-year low) and currencies (most Asian currencies except for the Japanese yen have lost value against the US dollar).
Moreover, the COVID-19 outbreak has caused massive disruptions to supply chains of goods and services, resulting in a sharp drop in consumer demand in many countries. The drop in consumer demand has prompted companies to slash their profits, causing the share prices of some of them to plummet. This has triggered fears of a recession, which in turn has exacerbated the stock market decline.
In order to understand the extent of the COVID-19 global market crash and its consequences, this paper analyzes data on the stock returns of different industries during this crisis. It finds that natural gas, food, healthcare and software stocks earn high positive returns, whereas equity values of petroleum, real estate, entertainment and hospitality industries plunge dramatically. Moreover, the stocks of losing industries exhibit extreme asymmetric volatility that correlates negatively with stock returns.
One of the most famous global market crashes is the 1987 “Black Monday” crash, whose causes include computerized trading programs, derivative securities, over-evaluation and illiquidity in the market. Another notable global market crash is the 2000 dot-com crash, which was triggered by technology stocks. Investors were swept up in the frenzied enthusiasm for internet related businesses, and flocked to tech companies that raised millions of dollars through initial public offerings with little more than business ideas. The shares of these companies fell rapidly once the tech boom cooled off.
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