COVID-19 and the Cross-Section of Equity Returns: Impact and Transmission

58 Pages Posted: 30 Apr 2020 Last revised: 26 Jan 2021

See all articles by Lorenzo Bretscher

Lorenzo Bretscher

Swiss Finance Institute - HEC Lausanne; Centre for Economic Policy Research (CEPR)

Alex Hsu

Georgia Institute of Technology - Scheller College of Business

Peter Simasek

Georgia Institute of Technology - Scheller College of Business

Andrea Tamoni

Rutgers, The State University of New Jersey - Rutgers Business School at Newark & New Brunswick

Date Written: April 29, 2020

Abstract

Using the first reported case of COVID-19 in a given US county as the event day, firms headquartered in an affected county experience an average 27 bps lower return in the 10-day post-event. This negative effect nearly doubles in magnitude for firms in counties with a higher infection rate (-50 bps). We test a number of transmission channels. Firms belonging to labor intensive industries and residing in counties with large mobility decline have worse stock performance. Firms sensitive to COVID-19 induced uncertainty also exhibit more negative returns. Finally, firms associated with downward earnings forecast revisions are more impacted.

Keywords: COVID-19, Equity Returns, Labor Supply, Uncertainty, Earnings Forecast

JEL Classification: E4, E6, G12

Suggested Citation

Bretscher, Lorenzo and Hsu, Alex and Simasek, Peter and Tamoni, Andrea, COVID-19 and the Cross-Section of Equity Returns: Impact and Transmission (April 29, 2020). Georgia Tech Scheller College of Business Research Paper No. 3588418, Swiss Finance Institute Research Paper No. 21-05, Available at SSRN: https://ssrn.com/abstract=3588418 or http://dx.doi.org/10.2139/ssrn.3588418

Lorenzo Bretscher (Contact Author)

Swiss Finance Institute - HEC Lausanne ( email )

Chavannes-près-Renens, Vaud
Switzerland
1015 (Fax)

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Alex Hsu

Georgia Institute of Technology - Scheller College of Business ( email )

800 West Peachtree St.
Atlanta, GA 30308
United States
4043851123 (Phone)

Peter Simasek

Georgia Institute of Technology - Scheller College of Business ( email )

800 West Peachtree St.
Atlanta, GA 30308
United States

Andrea Tamoni

Rutgers, The State University of New Jersey - Rutgers Business School at Newark & New Brunswick ( email )

1 Washington Park
Newark, NJ 07102
United States

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