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Market reactions to the arrival and containment of COVID-19: An event study
1Chair of Financial Services, Justus Liebig University Giessen, Licher St. 74, Giessen 35394, Germany.
Abstract:
We study the short-term market reactions of US and European stocks during the beginning of the COVID-19 pandemic. Employing an event study, we document that stocks react significantly negatively to the announcement of the first death in a given country. While our results suggest that the announcements of country-specific fiscal policy measures negatively affect stock returns, monetary policy measures have the potential to calm markets. These reactions are either intensified or lessened by firm-specific characteristics such as tangible assets, liquidity, and institutional holdings.
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