Were Stay-at-Home Orders During Covid-19 Harmful for Business? The Market’s View

We study the market reactions following staggered implementations of lockdowns across U.S. states during Covid-19. We find that returns on firms located in lockdown states are higher following the lockdown. We interpret these market reactions as reflecting updated beliefs of market participants in the light of events that follow the lockdowns, such as compliance with stay-at-home orders. The effect is (a) concentrated among counties with a high number of infections, (b) larger for firms in essential industries, and (c) larger for Democratic states. These findings suggest that the market perceives Non-Pharmaceutical Interventions, when effective, to be beneficial for businesses.

Keywords: Stock Market Reaction, Lockdown, COVID-19, Non-Pharmaceutical Interventions

JEL Classification: G10, G14, G18, I18

Suggested Citation: Suggested Citation

Chen, Chen and Dasgupta, Sudipto and Huynh, Thanh D. and Xia, Ying, Were Stay-at-Home Orders During Covid-19 Harmful for Business? The Market’s View (July 25, 2020). Available at SSRN: https://ssrn.com/abstract=3660246 or http://dx.doi.org/10.2139/ssrn.3660246