Journal
FINANCE RESEARCH LETTERS
Volume 38, Issue -, Pages -Publisher
ACADEMIC PRESS INC ELSEVIER SCIENCE
DOI: 10.1016/j.frl.2020.101827
Keywords
Investor Sentiment; Investor Behavior; Market Risk Premium; COVID-19; Investor panic; Lockdown Stringency
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This study finds that the negative impact of COVID-19 on stock market returns mainly comes from the updating of market risk premium, while the stringency of lockdown has both positive and negative effects on stock market returns.
This paper isolates the different effects of COVID-19 on the stock market returns and identifies the channels through which each of the effects influences the returns. Using a sample of twelve countries with most liquid stock markets, we find that the panic caused by the pandemic affects the stock return negatively through the updation of market risk premium channel. The stringency of the lockdown has a two-way effect on the stock market returns, whereas it affects the return negatively through the updation of growth forecasts, it also affects the return positively through the updation of market risk premium.
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