This thesis aims to determine whether bad-news events resulted in a negative reaction and good-news in a positive reaction in the United Kingdom banking sector, or if there was no significant abnormal reaction at all.
To address this research question, an event study was conducted for four events investigating 11 banks in the United Kingdom as securities and the FTSE 350 as a market index. The results showed an overall significant abnormal reaction; however only bad-news events result in significantly negative abnormal returns, while good-news events did not show consistent results.
COVID-19 hit the world economy very hard in nearly every sector. As financial intermediaries, banks face the difficult task dealing with a shrinking economy. Previous studies have shown that events during the COVID-19 pandemic have significantly influenced the stock market. In the financial crisis of 2007 to 2009, bad-news events resulted in a negative abnormal return and good-news events resulted in positive abnormal returns in the banking sector in the United Kingdom.
Inhaltsverzeichnis (Table of Contents)
- Introduction
- Hypothesis development
- Literature review
- Theoretical framework
- Market reactions to news
- Influence of major events on the stock market
- Function of banks
- The banking system in the UK
- Previous studies on the effect of COVID-19 on financial markets
- Global financial of crisis 2007 to 2009
- Timeline and causes
- Event study description
- Event study results
- Hypothesis formulation
- Theoretical framework
- Event study methodology
- Definition
- Timeline
- Calculating returns
- Measuring normal returns
- Constant mean return model
- Market model
- Economic models
- Abnormal returns
- Calculation of abnormal returns with the market model
- Calculation of cumulative and average returns
- Significance test
- Robustness checks
- Empirical results
- Event study data
- Historical data
- Event dates
- Bad-news events
- Good-news events
- Hypothesis analysis
- Event study data
Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)
This thesis investigates the impact of good and bad news events related to the COVID-19 pandemic on the stock market performance of UK banks. It aims to determine whether these events led to significant abnormal reactions in the banking sector, particularly focusing on whether bad news resulted in negative reactions and good news in positive reactions.
- The impact of COVID-19 on the UK banking sector.
- Event study methodology and its application in analyzing market reactions.
- Abnormal returns and their significance in assessing market performance.
- The relationship between good and bad news events and stock market reactions in the UK banking sector.
- Comparison of the findings to previous studies on financial crises and market reactions.
Zusammenfassung der Kapitel (Chapter Summaries)
The introduction sets the context for the research by highlighting the significant impact of COVID-19 on the global economy, particularly within the financial sector. This is followed by the development of the research hypothesis, which focuses on the anticipated reactions of UK banks to good and bad news events during the pandemic. The hypothesis is grounded in a thorough literature review covering relevant theoretical frameworks, the role of banks in the financial system, and previous research on the impact of COVID-19 on financial markets. The chapter also incorporates insights from the global financial crisis of 2007 to 2009, providing a historical context for understanding market reactions to major events.
Chapter 3 delves into the methodology employed in the study, outlining the key elements of an event study and its application in analyzing market reactions. The chapter explains the process of calculating returns, measuring normal returns using different models (constant mean return, market model, and economic models), and determining abnormal returns. It also discusses the significance test used to evaluate the results. The chapter concludes by addressing robustness checks to ensure the validity and reliability of the findings.
Chapter 4 presents the empirical results of the event study. It details the data used, including historical data and event dates. The analysis focuses on both bad-news and good-news events related to the COVID-19 pandemic, examining their impact on the stock market performance of UK banks. The chapter concludes by presenting an analysis of the findings in relation to the research hypothesis.
Schlüsselwörter (Keywords)
The key themes and concepts explored in this thesis include the COVID-19 pandemic, UK banking sector, stock market reactions, event study methodology, abnormal returns, good and bad news events, financial crisis, and market volatility.
- Literature review
- Quote paper
- Christian Gaa (Author), 2020, Stock Market Reactions of UK Banks During the COVID-19 Crisis, Munich, GRIN Verlag, https://www.grin.com/document/974203
