Abstract
This paper examines how Chinese stock markets react to the outbreak of COVID-19 in a window of fifty trading days, from January 20, 2020 to April 7, 2020. The results show that the coronavirus leads to big moves in stock prices. Stock prices fall sharply along with the lockdown of Wuhan city, however, I find that stock returns reverse in every ten trading days throughout the window period. The overreaction, the policy response together with the interconnectedness of modern economy through global supply chains might contribute to the frequent reversals. However, firm size is one key factor resisting the return reversals. I also find that non-SOEs, firms with higher ownership concentration and non-pilot firms of securities margin trading suffer more following the coronavirus pandemic. In contrast, these findings do not exist for the SARS outbreak in China from 2002 to 2003. This study contributes to literature on the impact of public health emergencies on stock prices.
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