Early COVID-19 policy response on healthcare equity prices

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Emerald Group Holdings Ltd.
Purpose: This paper aims to investigate the implementation of the short selling ban policy imposed by the Italian stock exchange on health-care stock prices, as a tool to mitigate COVID-19 price effects. Important contributions are in terms of assessing the effect of the temporary short selling ban on restricted health-care stocks; the effect of COVID-19 cases and crude oil price volatility onto health-care stocks; and whether COVID-19 resulted in a change in the risk and average stock price of health-care stocks. Design/methodology/approach: The methodology involves impulse responses to capture the shock of the short selling ban onto health-care stocks, and Markov switching regimes to capture the effect of COVID-19 onto the risk and prices in the health-care industry. Daily data from 9 November 2018 till 23 December 2020 is used. Findings: Findings suggest there were significant changes in average prices in health-care technology and health-care services stocks before, during and after the short selling ban. Shocks to the number of COVID-19 cases and crude oil price volatility impacted health-care stocks but lasted only for a few days. While daily changes in the number of COVID-19 cases impacted some health-care stocks in the presence of a two-state Markov regime, insignificant coefficients and relatively low duration suggest that the short selling policy did not significantly change the average price and risk in health-care stocks to explain a two-state regime in the health-care industry. Research limitations/implications: Insignificant coefficients in a two-state Markov regime reinforce that short-selling policies have a short-lasting effect onto health-care equity prices. The findings are limited by the duration of the short selling policy, the pandemic event and the health-care industry. Originality/value: This is the first study to look at the impact of early COVID-19 and short selling ban policy on health-care stocks. © 2021, Emerald Publishing Limited.
This article is not available at CUD collection. The version of scholarly record of this article is published in Studies in Economics and Finance (2021), available online at: https://doi.org/10.1108/SEF-02-2021-0075
COVID-19, Health-care stock prices, Short-selling ban
Gurrib, I. (2021). Early COVID-19 policy response on healthcare equity prices. Studies in Economics and Finance, 38(5), 987-1006. https://doi.org/10.1108/SEF-02-2021-0075