Covid-19 Outbreak and Industry Reactions: Evidence from Colombo Stock Exchange

Abstract

Moving along history, it can be identified that the human race has experienced
many types of challenges which did have the capacity to decide human existence or
extinction from the beginning. Some of these challenges were created by humans by
themselves like world wars and some were created by natural forces like natural disasters
and deadly viruses. Recently COVID-19 has taken place as a rapidly spreading virus by
causing more than two million deaths and more than 95 million cases around the world as
being the sixth global pandemic creating considerable influence to different industries
such as agriculture, health and transportation in the world. The propose of this study is to
identify the impact of COVID-19 on the performance of the industries in Sri Lanka. Using
the two events and the event study methodology it is found that industry groups such as
automobiles, materials, health care and equipment, household and personal care products
are the significantly positively affected industries where industries like insurance and
transportation have been negatively affected in Sri Lanka. As per the real business-cycle
theory these fluctuations in the industries consider as business cycle fluctuations and the
efficient response to exogenous changes in the real economic environment. Hence this
impact does not last long, investors and the government can recover quickly with the
implementation of effective monetary policies and investment diversifications.