What is it about?
This study examines the stock market reactions to the WHO announcement on 11 March 2020 and the Federal Reserve Bank announcement on 9 April 2020 across developed and emerging equity markets.
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Why is it important?
The announcement of COVID-19 as global pandemic by the WHO caused a negative shock to the global stock markets, especially in emerging markets and for small firms. We find that the US stock market experienced positive abnormal returns from the Fed stimulus compared to other developed countries and emerging markets. We find that the positive abnormal returns from the stimulus were garnered by the US large firms instead of the small firms.
Perspectives
While swift and large monetary policies such as unlimited QE and the Paycheck Protection Program could bring positive effects to counter the effect of COVID-19 on the equity markets, the overall impacts of such massive monetary policies are still far from being the perfect antidote, especially for small firms.
Dr Maretno Agus Harjoto
Graziadio Business School - Pepperdine University
Read the Original
This page is a summary of: COVID-19: stock market reactions to the shock and the stimulus, Applied Economics Letters, June 2020, Taylor & Francis,
DOI: 10.1080/13504851.2020.1781767.
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