The Effect of the COVID-19 Pandemic on the Scandinavian Stock Market

Esra Yilmaz & Alvinna Hussain

Student thesis: Master thesis


This thesis assesses the impact of the COVID-19 pandemic on stock performance in Scandinavia during the first wave. The main objective of the research is to investigate if the effects of the first COVID-19 wave have differed across sectors and the three Scandinavian stock markets. For this purpose, the thesis examines abnormal stock return fluctuations across sectors and countries by conducting an event study analysis and panel data regressions. Additionally, the thesis aims to understand the COVID-19 induced return fluctuations through a behavioral finance perspective.
The event study analysis confirms that the COVID-19 outbreak resulted in significant stock return fluctuations in all three Scandinavian stock markets. The outbreak induced fear and uncertainty among Scandinavian investors resulting in panic-selling and herding behavior, which led to a market crash in March 2020. From the panel regression analysis’ contributions, it is further evident that the decrease in stock prices was intensified by the increasing global uncertainty and spread of COVID-19. After the market crash, the following months were characterized by a recovery, where investors established a more optimistic outlook on the progression of the pandemic. Nevertheless, the findings indicate that the three Scandinavian markets generally reacted uniformly, and no significant difference in stock performance across the Scandinavian stock markets was evident. That is despite the three countries implemented different strategies to mitigate the impact of the pandemic and the difference in economic impact.
However, the findings of the panel regression models indicate that the reaction towards the implemented extraordinary measures did differ across the Scandinavian countries. More specifically, the results suggest that the Danish and Norwegian stock markets reacted positively to the mandatory restrictions applied by their governments. In contrast, the introduced restrictions in Sweden, on average, decreased the stock returns of Swedish companies. Moreover, the contributions of the regression models suggest that the imposed extraordinary fiscal policies and monetary policies only yielded a significant positive impact on stock performance in Sweden and Denmark, respectively.
Lastly, the conducted analyses contribute with evidence that stock performance differed across sectors, as the consequences of the new COVID-19 induced market conditions differed across sectors. Hereunder, the findings provide evidence that the Health Care, Consumer Staples, and Technology and Telecommunications sectors have performed significantly better than the rest of the market during the first wave of the pandemic. In contrast, it is concluded that the Consumer Discretionary, Energy and Utilities, and Real Estate sectors were hardest hit during the first wave.

EducationsMSc in Applied Economics and Finance, (Graduate Programme) Final ThesisMSc in Finance and Accounting, (Graduate Programme) Final Thesis
Publication date2021
Number of pages160