Journal of Economics and Management Volume 17, No. 2 September, 2021

Tripartite Analysis of COVID-19’s Impact on Stock Prices: A Case of Tesla Supply Chain in Taiwan

Ching-Yu Chen

Department of International Business, Tunghai University, Taiwan R.O.C.

Jwu-Rong Lin

Department of International Business, Tunghai University, Taiwan R.O.C.

Abstract

In this article, we analyzed the impact of COVID-19 on Tesla supply chain stock prices from three perspectives: modern portfolio theory, event study approach, and interactive seemingly unrelated regression estimation. We investigated the top ten Tesla related stocks in Taiwan. Our observations are summarized as follows. (1) The expected rate of return in the stock market had showed a significant decline in the early stage of the outbreak. The average investment risk 70 days after COVID-19 was announced as Public Health Emergency of International Concern was significantly higher than 70 days prior to the announcement. However, the extent of impact for each stock varied among Tesla related stocks. (2) The day when COVID-19 was declared as a pandemic, negative Cumulative Average Abnormal Returns (CAAR) were immediately observed. In contrast, when Taiwan government announced the lockdown of border and the confirmed cases of navy members on the Dunmu Fleet, Taiwan stock market did not react negatively to the news and for some days CAARs even appeared to be positive. (3) Taiwan’s stock market was relatively stable during the pandemic. The reason why COVID-19 had negative impacts on Taiwan stock market in 2020 was mainly due to the disease situation of foreign epidemic.

Keywords：COVID-19, Tesla Supply Chain, Modern Portfolio Theory, Event Study, Interactive Seemingly Unrelated Regression

JEL Classifications：C33, E44, G11, L62.

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