Abstract
The COVID-19 pandemic has had an adverse impact on the global economy and disrupted the global supply chain. One specific area of the economy the pandemic has adversely impacted is the equity market, in terms of price reactions and volatility. Research on the impact of the COVID-19 pandemic on equity price is still a growing area of research and is of great interest in finance and business history. The main aim of this study is to determine the impact of the COVID-19 pandemic on the South African equity market. The four main objectives are: firstly, to investigate whether the COVID-19 pandemic has influenced the South African equity market. The second objective is to analyse the equity price reactions in response to the COVID-19 pandemic. The third objective is to examine the idiosyncratic nature of equity prices in the different Top 40 companies listed on the JSE. Finally, the fourth objective is to provide an academic argument to policy makers and investment managers on effective measures to prevent a serious stock market crash in South Africa in the face of the COVID-19 pandemic. By making use of the JSE TOP 40 Index that is listed on the Johannesburg Stock Exchange, in this study, an event study methodology is adopted to analyse the reaction of the equity prices and market volatility in South Africa. The empirical findings suggest that the mostly affected stock on the Johannesburg Stock Exchange are those companies operating in the financial sector. This is mainly explained by the reduction in economic activity brought about by the COVID-19 pandemic, as well as the implemented government policies, such as quarantine, partial and full, national lockdowns, and the temporal shut down of certain economic activities in order to flatten the curve. Nevertheless, other companies from different sectors, such as technology, telecommunication, consumer goods, health care, industrials, and consumer services have all benefited from the COVID-19 pandemic.