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.