The Impact of Two Kinds of Responses to COVID-19 on the Stock Prices of Multinational and Local Enterprises

Abstract

Ever since COVID-19 became popular around the world, there are two kinds of measures taken by governments to respond to the impact on stock markets, including controlling the number of new cases and promulgating economic policies to stimulus economy. This paper studies how the two measures, controlling the spread of COVID-19 and formulating economic policies, impact stock returns in United States and what are the differences. Additionally, this paper analyses if these two measures have the same impact on multinational companies and local companies. By using CAPM and descriptive statistical analysis, the researchers find that economic stimulus is effective in short term but controlling the spread of pandemic plays the key part in long-term economic growth, international trades make a difference in reducing risk during COVID-19. Finally, to understand is the impact of investor sentiment on stock prices the reason for these two responses to changes in stock returns, Fama-French three factor with sentiment factor added is used to explore the relationship between investor sentiment and stock returns. The conclusion is that changes in investor sentiment are positively correlated with the excess return of the portfolio.