Proximity to COVID-19 Cases and Real Estate Stock Returns
37 Pages Posted: 2 Jul 2020 Last revised: 23 Mar 2022
Date Written: July 2, 2020
We explore the effects of proximity to COVID-19 cases on real estate company performance. We use the quasi-natural setting of the first months of the COVID-19 outbreak in Hong Kong in which the locations of each COVID-19 patient have been publicly announced to identify the effects of virus contagion on real estate stock returns. We compile a novel dataset on the geographic footprint of COVID-19 patients in Hong Kong matched with the location of the property holdings of real estate firms. Using a difference-in-differences (DID) spatial discontinuity model we can identify the COVID-19 effects based on the proximity of company’s underlying assets to announcements of COVID-19 cases. We find that companies whose underlying assets are located in proximity to a COVID-19 case have between 0.04% and 0.23% significantly lower daily returns one day after the case disclosure for distances between 1 mile and 0.1 miles respectively.
Keywords: COVID-19 case proximity, listed real estate company returns, difference-in-difference spatial discontinuity, spatial effects.
JEL Classification: I10, G1, G14, D81, R30
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