Stay-at-Home Stocks Versus Go-Outside Stocks: The Impacts of COVID-19 on the Chinese Stock Market

This paper investigates the distinct market reactions to the COVID-19 outbreak by focusing on two groups of stocks in the Chinese stock market, i.e., the stay-at-home (SAH) stocks, and the go-outsides (GO) stocks. The empirical results mainly reveal that: (1) for the GO stocks, there exists a significantly negative return on the event date and the cumulative abnormal return reveals reversal pattern; (2) for the SAH stocks, no significantly negative return is observed on the event date and the cumulative abnormal return continues to increase; and (3) generally speaking, the reaction of the GO stocks supports the price pressure hypothesis, while the reaction of the SAH stocks supports the information diffusion hypothesis. Our results suggest that investors in the Chinese stock market could moderately interpret the good news but underestimate the bad news.