The Impact of COVID-19 on the Norwegian Stock Market

Abstract

This paper studies the potential economic impact of the COVID-19 pandemic using Norwegian stock market data. We conduct event studies on three major events that are related to the evolution of the COVID-19 pandemic in Norway, namely the first confirmed COVID-19 case in Norway, the WHO’s declaration of COVID-19 as a pandemic and the Norwegian government’s new COVID-19 policies, and the press conference on the second wave. Our analysis suggests that the Norwegian stock market responded negatively to all three events, with its strongest reaction being to the second event. In addition, our multifactor regression analysis shows that profitability, firm size, and liquidity are the factors that potentially explain the variation in stock market reactions. We also find a large variation in market reaction between different sectors. Furthermore, we carry out a comparative analysis of stock market reactions in Norway, Denmark, and Sweden and find similar patterns among these countries. Finally, whereas most sectors experienced stock prices collapse and volatility jumps in early 2020, our analysis of shareholder returns suggests that many sectors show signs of recovery.