Feverish stock price reactions to Covid-19

The market reactions to the 2019 novel Coronavirus disease (Covid-19) shed light on the importance of international trade and financial policies for firm value. Initially, investors priced negative consequences for internationally oriented US firms, especially those with China exposure. As the virus spread to Europe and the US, markets moved feverishly. However, the cross-section of returns exhibits clear patterns. Corporate debt and cash holdings emerged as important value drivers, relevant even after the Fed intervened in the corporate bond market. Overall, the results illustrate how the health crisis morphed into an economic crisis amplified through financial channels.