COVID-19 and the Cross-Section of Equity Returns: Impact and Transmission

Using the first reported case of COVID-19 in a given U.S. county as the event day, we find that firms headquartered in an affected county experience, on average, a 27-bps lower return in the 10-day post-event window. This negative effect nearly doubles in magnitude for firms in counties with a higher infection rate (-50 bps). We test a number of transmission channels. Firms belonging to labor-intensive industries and those located in counties with a large mobility decline have worse stock performance. Firms sensitive to COVID-19-induced uncertainty also exhibit more negative returns. Finally, more negative stock returns are associated with downward revisions in earnings forecasts.