How does COVID-19 Affect the Stock Market in Norway? An Event Study Comparing the Norwegian Stock Market to the Stock Markets in Sweden and Denmark

Abstract

The outbreak of COVID-19 weakened the world economy and the overall stock market crashed. The purpose of this thesis was to examine how the stock market reacted to key events during the COVID-19 pandemic. The first event was the first confirmed COVID-19 case in Norway on February 26, 2020, the second event was WHO declaring COVID-19 a pandemic on March 11, 2020, and the third event was the Norwegian government’s press conference regarding the second COVID-19 wave on October 23, 2020. Our main focus was to investigate Oslo Stock Exchange, but we also compared Norway to Sweden and Denmark. In addition to this, we also analyzed if any firm-specific factors affected the return. We conducted an event study methodology to measure abnormal returns. Then we regressed these abnormal returns from one of the events to analyze the causes. First, our results show that the stock market in Norway was negatively affected by COVID- 19. Second, we found that the day that WHO declared COVID-19 as a pandemic had the most impact on the stock markets out of the three events, and Norway was more negatively affected than Sweden and Denmark. Third, our additional study show that trading volume was the factor that had the most impact on the return. Profitability and firm size were also influential factors, but not to the same extent. Lastly, the health care sector was hit the hardest, followed by the financials and energy sectors. Industrials and consumer staples were the least negatively affected.