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

30 Pages Posted: 4 Aug 2020

See all articles by Chen Chen

Chen Chen

Monash University - Department of Accounting

Sudipto Dasgupta

Chinese University of Hong Kong, ABFER, CEPR, and ECGI

Thanh Huynh

Monash University - Department of Banking and Finance

Ying Xia

Monash University - Monash Business School

Date Written: July 25, 2020

Abstract

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

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

Chen Chen (Contact Author)

Monash University - Department of Accounting ( email )

Building H, Level 3
Caulfield campus
Melbourne, Victoria 3800
Australia

Sudipto Dasgupta

Chinese University of Hong Kong, ABFER, CEPR, and ECGI ( email )

CUHK, Cheng Yu Tung Building, Room 1224
Shatin, NT
Hong Kong
Hong Kong

Thanh D. Huynh

Monash University - Department of Banking and Finance ( email )

Melbourne
Australia

Ying Xia

Monash University - Monash Business School ( email )

900 Dandenong Road
Caulfield Campus
Melbourne, Victoria 3145
Australia

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