COVID-19: stock market reactions to the shock and the stimulus

Maretno A. Harjoto · Fabrizio Rossi · John K. Paglia

212 citations0/0 files storedApplied Economics Letters

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COVID-19 Pandemic Impacts Financial Markets and Investment Strategies Market Dynamics and Volatility

Abstract

Using the WHO announcement on 11 March 2020 and the Federal Reserve Bank announcement on 9 April 2020 as two events that represent the shock and the stimulus, this study finds that COVID-19 caused a negative shock to the global stock markets, especially in emerging markets and for small firms. We find that the US stock market experienced positive abnormal returns from the Fed stimulus compared to other developed countries and emerging markets. We find that the positive abnormal returns from the stimulus were garnered by the US large firms instead of the small firms.

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References

1997Do Investment-Cash Flow Sensitivities Provide Useful Measures of Financing Constraints?1985Using daily stock returns 1988Financing Constraints and Corporate Investment 1997Why Focused Strategies May Be Wrong for Emerging Markets 2020The Global Macroeconomic Impacts of COVID-19: Seven Scenarios 2001Financial Constraints and Stock Returns 2020Feverish Stock Price Reactions to COVID-19*2020The Macroeconomics of Epidemics

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