Answered: The Covid-19 pandemic caused…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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The Covid-19 pandemic caused shockwaves on stock markets in 2020 with implications on shareholder wealth.
a) Describe how event study methodology can be adopted in measuring the impact of the pandemic on the stock price of a listed company. Relate your discussion to the Efficient Market Hypothesis. 800words

b) Discuss the benefits and drawbacks of adopting this methodological approach in examining this event. 200words

Definition Definition Degree to which financial markets incorporate all available information into the prices of assets. In a more efficient market, the prices reflect the available information more than that in a weak efficient market. It is difficult for investors to outperform the market in a strong efficient market. This is because all the available information is already discounted in the asset's price. However, in a weak-form efficiency, the market does not reflect all information in the asset's price. As a result, it becomes easier to generate better returns in a weak form or an inefficient market.

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