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Title: Feverish Stock Price Reactions to COVID-19

Author(s): Stefano Ramelli and Alexander F Wagner

Publication Date: March 2020

Keyword(s): Coronavirus, Corporate Debt, COVID-19, event study, global value chains, leverage, Pandemic, SARS-CoV-2, Supply Chains and tail risk

Programme Area(s): Financial Economics

Abstract: The market reactions to the 2019 novel Coronavirus disease (COVID-19) provide new insights into how real shocks and financial policies drive firm value. Initially, internationally-oriented firms, especially those more exposed to trade with China, underperformed. As the virus spread to Europe and the US, corporate debt and cash holdings emerged as important value drivers, relevant even after the Fed intervened in the bond market. The content and tone of conference calls mirror this development over time. Overall, the results illustrate how the anticipated real effects from the health crisis, a rare disaster, were amplified through financial channels.

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Bibliographic Reference

Ramelli, S and Wagner, A. 2020. 'Feverish Stock Price Reactions to COVID-19'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=14511