Covid-19 and Stock Market Performance : Evidence from the Rcep Markets

As the world's largest trading bloc, the RCEP, is believed to play a non-neglectable role in the post-pandemic recovery. By looking into the shocks in early 2020 that affect the stock markets of RCEP participating regions, we measure the stock market reaction to common risks before the RCEP agreement was formalized. Following event-study approach, our research uses daily data from 15 Asia-Pacific regions. We find that developed RCEP markets responded faster to and recovered faster from shocks brought by the COVID-19 in the short run, while the emerging markets appeared to be less efficient and have weaker risk-resistant ability. Domestic-to-USD exchange rate growth is associated with more severe abnormal return and abnormal liquidity drop for emerging RCEP markets, suggesting that the capital structure of which is more dominated by international floating capital. In the long run, the RCEP forms a system of circular flow of international trading activities, which will in turn increase the risk resistance ability of stock markets