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Covid-19 and Firms’ Stock Price Growth: The Role of Market Capitalization

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  • Markus Brueckner
  • Wensheng Kang
  • Joaquin Vespignani

Abstract

This paper studies the role of capitalization on firms’ stock price growth in response to new cases of Covid-19 infections in the United States. Controlling for firm and time fixed effects, our panel model estimates show that the effect of new cases of Covid-19 infections on firms’ stock price growth is significantly increasing in capitalization: For each one standard deviation increase in capitalization, a one standard deviation increase in new cases of Covid-19 infections increases the weekly growth rate of firms’ stock prices by about 0.7 percentage points. Effects of capitalization on the impact that Covid-19 infections have on firms’ stock price growth are largest in the travel, tourism, and hospitality sector. Smaller but still positive effects of capitalization are present in the pharmaceutical products, high-tech, and banking and finance sectors.

Suggested Citation

  • Markus Brueckner & Wensheng Kang & Joaquin Vespignani, 2021. "Covid-19 and Firms’ Stock Price Growth: The Role of Market Capitalization," ANU Working Papers in Economics and Econometrics 2021-683, Australian National University, College of Business and Economics, School of Economics.
    • Handle: RePEc:acb:cbeeco:2021-683
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    File URL: https://cbe.anu.edu.au/researchpapers/econ/wp683.pdf
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    More about this item

    Keywords

    Covid-19; performance of firms; stock market capitalization; U.S. stock market;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)

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