LAUSR

The actual macroeconomic impacts of the COVID-19 pandemic will be realized over time; however, its impact on financial markets was much faster and dramatic. Following the spread of the pandemic, most global equity markets experienced significant falls and started to rebound with the announcement of economic rescue packages. However, the equity markets’ responses to the packages have varied across countries. In this paper, we first look at what may explain the differences in the equity market falls across-countries. Secondly, we study the systematic relation between the size and the type of rescue packages, the severity of the outbreak and the recovery performance of equity markets. Using cross-country OLS regressions, we find that investors’ immediate reaction to equity markets in countries with higher pandemic related deaths is more negative. Moreover, our results show that not all types of rescue packages are effective in restoring investors’ valuation of equity markets. Among different types, fiscal stimulus support seems to be a stronger predictor of equity market recovery performance. We also find that the severity of the outbreak in each country affected the equity markets’ reactions.