Purpose
The current study aims to identify how the Egyptian Stock Exchange (EGX30), responses to the Covid-19 pandemic by focusing on investment strategies followed by its sectors during the crisis in both short- and long-term.
Methodology
Study employs the same logic of (Aravind,2016,2020) concerning winning and losing portfolios. Additionally, applies their mathematical model to express momentum and contrarian effect. Data consists of daily trading prices from 1st February 2019 to 14th June 2022 on 17 sectoral portfolios, it covers 820 trading days * 17 price observations. The study period was classified into before and during pandemic and was divided into short- and long-term. Each period was split into formation and test period.
Findings
The analysis of short-term trends before the crisis showed that 5 sectors were Winners (2 momentums, 3 contrarian), and 12 were Losers (8 momentums, 4 contrarian), while the long-term trend during the crisis showed that a total of 15 sectors were Winners (6 momentums, 9 contrarian) and 2 were Losers (1 momentum, 1 contrarian). Investors, therefore, prefer taking a risk-averse mindset in the short-term, but in the long-term they are referred to be risk-seekers.
Originality
This study is one of the first attempts to examine how the (EGX30) reacts to Covid-19 pandemic by using momentum and contrarian strategies to explain this reaction.
Implications
This study is valuable for investors and policymakers alike, as it provides a better understanding of how market participants respond to crises and how investment strategies may need to adapt to changing market conditions. Moreover, for academics interested in how epidemics influence investment decisions or strategies. Furthermore, it presents a unique perspective on the impact of the pandemic on emerging market, which may differ from the experiences of developed countries' markets. More researches are needed to assess the determinants of this investment decision.