 Stock market reactions under the shadow of the COVID-19 pandemic: Evidence from ChinaWenyu Zhou, Yujun Zhou, Adam Zaremba and Huaigang Long Journal of Behavioral and Experimental Finance, 2024, vol. 42, issue C Abstract: This paper studies how the Chinese stock market reacts to new COVID-19 infections under the zero-COVID policy. Consistent with the literature, we find that a COVID-19 outbreak within a city adversely affects the performance of local firms, but further unveils the effect’s nonlinearity. More importantly, we document an unexpected pattern of spatial spillover of the COVID-19 shock, which is likely to be caused by the policy itself. In addition, firms with significant retail exposure are most vulnerable, while firms with low pandemic exposure, larger size, state-owned enterprise (SOE) status, and robust finances demonstrate greater resilience to the COVID-19 shock. Mechanism analysis indicates that the COVID-19 effects are realized through both cash flow and discount rate channels. Supplementary back-of-the-envelope calculations illustrate the substantial economic consequences of these phenomena, which shed light on the debate on the optimal policy in response to a future pandemic. Keywords: COVID-19; Zero-COVID policy; Chinese stock market; Stock returns; Spatial spillover (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:beexfi:v:42:y:2024:i:c:s2214635024000388 DOI: 10.1016/j.jbef.2024.100923 Access Statistics for this article Journal of Behavioral and Experimental Finance is currently edited by Michael Dowling and Jürgen Huber More articles in Journal of Behavioral and Experimental Finance from Elsevier |
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