How the Covid-19 Pandemic Affects Stock Returns of Securities Companies: Evidence from a Frontier Market

The purpose of this study is to find out how the factors affecting stock return changed during Pre-coronavirus disease 2019 (Covid-19) and During-Covid-19 based on Bayesian estimates for 22 securities companies listed in Vietnam. Groups of factors including macro, size, and financial indicators are used for regression for each period model. The Covid-19 dummy variable was added to the model for the general dataset including both periods. The results show that earnings per share (EPS), price-to-earnings ratio (PE), and the Covid-19 pandemic have a positive impact on stock return. Interestingly, the effects of gross domestic product (GDP) growth, inflation, and size are opposite when comparing the regression results for these two periods. This opposite sign can be explained by the market’s recognition of Vietnam’s efforts to maintain GDP growth and control inflation when compared to other countries in the context of Covid-19. In this context, the probability of the impact of EPS is higher, the probability of PE is lower, and stocks of larger companies are preferred over the “small size effect” observed in the previous period. The results of the study deepen the current literature on the factors affecting stock returns in the context of the Covid-19 pandemic, providing implications for investors and policymakers to make decisions.