The stock market response to COVID-19

: evidence from five developed markets

Abstract

This study evaluates the connection between stock returns and the COVID-19 pandemic in fivedeveloped markets, including Canada, France, Germany, the United Kingdom, and the United States. The analysis is based on observations ranging from December 2019, when the first official cases of the new virus were discovered, to April 2022 and uses data from 3,120 firms. Stock returns reacted negatively to the growth of cumulative cases and deaths in the overall sample as well as across four of the five countries, except for the United Kingdom. While the relation between lockdowns and stock performance is also negative, fiscal stimuli seem to have a positive impact. Furthermore, I find that higher perceived risk and rising uncertainty, measured by Google search volume and a policy uncertainty index based on news, are also related to lower performance in most regression specifications. It can be observed that smaller companies in my sample suffer more from a higher growth rate of cumulative cases than medium-sized ones and the largest firms even experience a positive effect. Finally, I show that industry affiliation matters. The pandemic-related change in stock returns across industries varies in statistical and economic significance, with some coefficients being positive and others negative.

Date of Award	18 Oct 2022
Original language	English
Awarding Institution	Universidade Católica Portuguesa
Supervisor	Eva Schliephake (Supervisor)