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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% 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. The results are robust to controlling firms’ elasticity of demand, productivity, financial constraints, managerial compensations, and aggregate money growth and economic activity.

Item Type:	Refereed Article
Keywords:	Covid-19, U.S. stock market, performance of firms, stock market capitalization
Research Division:	Economics
Research Group:	Applied economics
Research Field:	Macroeconomics (incl. monetary and fiscal theory)
Objective Division:	Economic Framework
Objective Group:	Macroeconomics
Objective Field:	Macroeconomics not elsewhere classified
UTAS Author:	Vespignani, J (Associate Professor Joaquin Vespignani)
ID Code:	154440
Year Published:	2023 (online first 2022)
Deposited By:	Finance
Deposited On:	2022-11-30
Last Modified:	2023-01-06
Downloads:	0