The impact of social distancing on trading activity during the COVID-19 pandemic

I explore the impact of social distancing on trading activity during the COVID-19 pandemic using real-time location tracking data from Facebook users. I find that stocks categorized as "harder-to-value," which are typically smaller, less transparent, less visible, and less profitable, experience decreased abnormal trading with more social distancing in their headquarters counties. In contrast, "easier-to-value" stocks show an increase in abnormal trading due to high social distancing in their headquarters counties. These findings indicate that greater firm-specific information asymmetry arises from increased social distancing within the firm headquarters counties. Although "easier-to-value" stocks can use alternative information sources to mitigate the information asymmetry, "harder-to-value" stocks fail to do so and face negative impact on trading. Additional analyses using alternative information channels, market sidedness, and liquidity confirm this hypothesis.