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The Review of Asset Pricing Studies Vol. 10 No. 4 2020

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

Lorenzo Bretscher1; Alex Hsu2; Peter Simasek2; Andrea Tamoni3

1 London Business School and HEC Lausanne · 2 Georgia Institute of Technology · 3 Rutgers Business School

open access

Abstract

Using the first reported case of COVID-19 in a given U.S. county as the event day, we find that firms headquartered in an affected county experience, on average, a 27-bps lower return in the 10-day post-event window. 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 those located in counties with a large mobility decline have worse stock performance. Firms sensitive to COVID-19-induced uncertainty also exhibit more negative returns. Finally, more negative stock returns are associated with downward revisions in earnings forecasts.

DOI
10.1093/rapstu/raaa017
Volume
10
Issue
4
Pages
705-741
Language
en
Sources
bibtex:phds-export.bib openalex crossref

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