The Positive and Negative Impacts of the Sars Outbreak: A Case of the Taiwan Industries

Abstract

In this paper we employ an event study approach with GARCH process to uncover whether there were positive impacts on the Taiwan’s stock market during the SARS outbreak period in 2003. The empirical results indicate that the SARS crisis did bring negative impacts on tourism and the wholesale and retail sectors. This result has been confirmed by many previous studies, but it is most important that the biotechnology sector saw positive shocks from the impacts of the SARS crisis. It is clear that the value effect of SARS outbreak seems to be asymmetrical within our sample firms. Therefore, fund managers and investors at that time were able to buy and hold biotechnology stocks and rearrange their portfolios to obtain investment profits, maintain portfolio returns, or lower investment risks during the SARS outbreak period in Taiwan. The government of Taiwan should support the developments of each industry sufficiently, and then these industries could help to protect the nation’s economy and residents’ health against any possible impact of disease, such as SARS.

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