The Impact of the Covid-19 Outbreak on the Stock Value of Food Companies: Case Study of the Tehran Stock Exchange- Iran

Document Type : Research Article-en

Authors

• S.M. Mojaverian
• F. Eshghi
• S. Ahangari

Department of Agricultural Economics, Faculty of Agricultural Engineering, Sari of Agricultural Sciences and Natural Resources University, Sari, Iran

https://doi.org/10.22067/jead.2022.71165.1053

Abstract

In addition to imposing a negative impact on public health, Covid-19 has made the world face a huge financial-economic crisis. The worldwide spread of the coronavirus has also affected the volume of transactions and the value of stocks. Since the food market is more affected under crisis conditions, this relationship has been investigated in the stock exchange in the present study. In order to investigate the effect of Covid-19 patients on the stock index value of food industry companies as well as the relationship between risk and stock index value, the official daily data of the Ministry of Health and Medical Education and the Financial Information Processing Center of Iran were collected from March 3, 2021 when the first report was announced, to June 2, 2021. Mean Conditional heteroscedasticityvariance regression models were used in the current study. The statistical model specification tests showed that, first, the assumption of heteroscedasticitywas rejected and the needto useheteroscedasticitymodels was proved. Secondly, the asymmetry assumption was accepted. Model estimation results showed a relationship between the numbers of Covid-19 patients with the stock value of the food industry that was an increase in the number of infected people causes a decrease in the stock value of the food industry. Therefore, like other economic sectors, the capital market was affected by the Covid-19 crisis, and increasing exchange rate as a competing market had a negative effect on the stock price index. Also, considering the relationship between risk and stock value of food industries, as expected, there was an inverse and significant relationship between risk and stock value of food industry companies. In other words, an increase in risk leads to a decrease in the stock price of food industries.

Keywords

• Stock market
• Coronavirus
• Conditional heteroscedasticity model
• Iran

20.1001.1.20084722.1401.36.4.2.5

Main Subjects

• Agricultural Economics

References

1. Abedi, M., & Farhani, A. (2020). Socio-economic consequences of corona virus with emphasis on Iran. https://civilica.com/doc/1127302/. (In Persian)
2. Albulescu, C. (2020). Coronavirus and financial volatility: 40 days of fasting and fear.http://dx.doi.org/10.2139/ssrn.3550630.
3. Anusakumar, S.V., Ali, R., &Wooi, H.C. (2017). The effect of investor sentiment on stock returns: insight from Emerging Asian markets. Asian Academy of Management Journal of Accounting and Finance (AAMJAF), PenerbitUniversitiSains Malaysia13(1): 159-178.
4. Aslam, F., Mohmand, Y.T., Ferreira, P., Memon, B.A., Khan, M., & Khan, M. (2020). Network Analysis of Global Stock Markets at the beginning of the Coronavirus Disease (Covid-19) Outbreak. BorsaIstanbulReview20: 49-61.
5. Cepoi, C.O. (2020). Asymmetric dependence between stock market returns and news during Covid19 financial turmoil. Finance Research Letters, volume 36.
6. GhadiriMoghadam, A., &Rafie, H. (2010). Investigating and determining the optimal stock portfolio of companies active in the food industry of the Tehran Stock Exchange. Agricultural Economics andDevelopment (Agricultural Sciences and Industries) 3: 304-309.
7. Gormsen, N.J., & Koijen, R.S. (2020). Coronavirus: Impact on stock prices and growth expectations. The Review of Asset Pricing Studies 10: 574-597. https://doi.org/10.1093/rapstu/raaa013.
8. Heyden, K.J., &Heyden, T. (2020). Market Reactions to the Arrival and Containment of Covid-19: An Event Study.Finance Research Letters.http://doi.org/10.1016/j.frl.2020.101745. https://www.tgju.org/archive/price_dollar_rl.
9. Hutt, R. (2020). The economic effects of Covid-19 around the world.
10. Jafari, R., Kouhestani, A., &NejadZare, SH.)2020(. The impact of Corona on the economy of Iran and the world. First Conference on Industrial Engineering, Economics and Management. (In Persian)
11. Li, Y., Liang, C., Ma, F., & Wang, J. (2020(. The role of the IDEMV in predicting European stock market volatility during the Covid-19 pandemic. Finance Research Letters, volume 36.
12. Menjazb, M.R., &Nosrati, R.)2018(. Advanced econometric models. First Edition, Kind Book Publishing Institute, Tehran.
13. Ministry of Health and Medical Education. < behdasht.gov.ir>.
14. Mojtahedi, F., Mojaverian, M., & Hosseini, A. (2020). Modeling systematic risk in determination of optimal portfolio. (A case study of shares of food industrial companies in Tehran stock exchange). Agricultural Economics and Development (Agricultural Sciences and Industries) 2: 149-161. (In Persian)
15. Morales, L., & Callaghan, B.A. (2020). Covid-19: Global Stock Markets “Black Swan”. GlobalEconomic and financial Crises 1: 1–14.
16. Rahnamay, F., &Mohseni, A. (2018). Political communication, cash dividends and stock returns in companies listed on the Tehran Stock Exchange. Journal of Financial Research, Securities Analysis Financial Knowledge.
17. Ramelli, S., & Wagner, A.F. (2020). Feverish stock price reactions to covid-19. The Review of Corporate Finance Studies 9: 622–655. https://doi.org/10.1093/rcfs/cfaa012.
18. Saneifar, M., &Saeedi, P. (2020). Comparison of complex networks stock markets and economic variables before and after corona virus outbreaks. Journal of Economic Modeling Research 40: 123-158.(In Persian)
19. Sansa, N.A. (2020). The impact of the Covid-91 on the financial markets: evidence from ChinaandUSA. Electronic Research Journal of Social Sciences and Humanities 2.
20. Selmi, R., & Bouoiyour, J. (2020). Global Market's Diagnosis on Coronavirus: A Tug of War between Hope and Fear. https://hal.science/hal-02514428.
21. Sharif, A., Aloui, C., &Yarovaya, L. (2020).  Covid-19 Pandemic, Oil Prices, Stock Market, Geopolitical Risk and Policy Uncertainty Nexus in the US Economy: Fresh Evidence from the Wavelet-Based Approach.International Review of Financial Analysis 70.
22. Soheili, H., Haji, M., Gerami, B., &Rezaie, S. (2020). An introduction to the effects of Coronavirus in the Iranian economy. Ministry of Cooperatives Labour and Social Welfare. (In Persian)
23. Taherinia, M., &Hasanvand, A. (2020). Economic consequences of Covid-19 disease on the Iranian economy; with an emphasis on employment. Journal of Nursing Management 9: 44-58. (In Persian)
24. Wang, C., Li, W., Drabek, D., Okba, N.M.A., Haperen, R., Osterhaus, A.D.M.E., Kuppeveld, J.M., Haagmans, B.L., Grosveld, F., & Bosch, B. (2020). “A human monoclonal 9 antibody blocking SARS-CoV-2 infection”.Nature Communications 11.
25. Yan, B., Stuart, L., Tu, A., & Zhang, T. (2020). Analysis of the effect of Cvid-19 on the stock market and potential investing strategies. http://doi.org/10.2139/ssrn.3563380.