Covid-19 and Lockdown Effects on Stock Returns

Given the rising prominence of electronic-commerce following COVID-19, this study highlights for the first time the effects of the pandemic and lockdown on the stock returns of companies that can easily move online and for those that find it difficult to do so. The study uses daily stock returns and accounting information of listed firms in the FTSE100. This study relied on panel data regression technique. Robust standard error is used to correct for both potential heteroskedasticity and autocorrelation. The evidence suggests that COVID-19, on average, has a significant negative effect via the lockdown on firm value. The effect is, however, heterogeneous with some of the firms responding positively to the lockdown, whereas others responded negatively. The evidence suggests that the provision of essential products and services during the period is the driver of the positive effect of the lockdown and not the easiness to move online. As the London Stock Exchange is one of the largest global stock markets, our findings have implications for understanding the depth of the COVID-19 health crisis on firms’ value. This study also has implications for academics and policy makers.