Table 3.

The pandemic epicenters and stock return responses to news.

This table presents the regression results of current and future stock returns for the heterogeneous impact of the pandemic on stock return responses to news. The pandemic epicenters are identified as the states that have the state-level epidemic spread scaled by population size above the daily median. $E{C}_{i,t}$ is a dummy variable that equals 1 if firm $i$ is headquartered in the states identified as pandemic epicenters of day $t$ and 0 otherwise. In Panel A, the dependent variable in the regression is the stock close-to-close returns of day $t$, $Retur{n}_{i,t}$. In Panel B, the dependent variable in the regression is the future stock returns over the next ten days, $Retur{n}_{i,(t+1,t+10)}$. $MkNew{s}_t$ and $FmNew{s}_{i,t}$ indicate market-wide and firm-specific news on day $t$, respectively. In both panels, Columns 1 and 2 focus on the full period from January 2019 to December 2020, and $Outbrea{k}_t$ is a dummy variable being zero during January 1, 2019 through February 28, 2020 and unity from February 29, 2020 onwards. Columns 3 and 4 consider the post-outbreak period from February 29 to December 31, 2020, and $dSprea{d}_t$ is the detrended spread of the COVID-19 infection on day $t$. $\Delta VI{X}_t$ refers to the change in market volatility index. Stock fixed effects are included in all regressions, together with $\Delta VI{X}_t$ and five lags of stock returns. Five lags of market returns are also included in even columns. Standard errors are clustered at the stock level. The t-statistics are reported in parentheses. ***, **, and * indicate significance at the 1%, 5%, and 10% levels, respectively.

Panel A: Current returns
	Full period: $X_t=Outbrea{k}_t$			Post-outbreak period: $X_t=dSprea{d}_t$
	(1)	(2)		(3)	(4)
$MkNew{s}_t$	0.117*** (4.20)	0.108*** (3.89)		0.098*** (3.52)	0.088*** (3.16)
$FmNew{s}_{i,t}$	0.122*** (4.39)	0.113*** (4.06)		0.087*** (3.12)	0.077*** (2.77)
$E{C}_{i,t}$	−0.082*** (−2.96)	−0.078*** (−2.80)		−0.074*** (−2.65)	−0.070** (−2.51)
$X_t$	−0.090*** (−3.23)	−0.083*** (−3.00)		−0.081*** (−2.90)	−0.073*** (−2.63)
$MkNew{s}_t\times X_t$	0.124*** (4.45)	0.116*** (4.17)		0.099*** (3.57)	0.093*** (3.34)
$MkNew{s}_t\times X_t\times E{C}_{i,t}$	0.098*** (3.52)	0.089*** (3.19)		0.082*** (2.94)	0.074*** (2.66)
$FmNew{s}_{i,t}\times X_t$	−0.093*** (−3.34)	−0.088*** (−3.15)		−0.073*** (−2.61)	−0.070** (−2.50)
$FmNew{s}_{i,t}\times X_t\times E{C}_{i,t}$	−0.078*** (−2.81)	−0.073*** (−2.63)		−0.064** (−2.29)	−0.061** (−2.18)
$MkNew{s}_t\times E{C}_{i,t}$ & $FmNew{s}_{i,t}\times E{C}_{i,t}$	YES	YES		YES	YES
Constant & $\Delta VI{X}_t$	YES	YES		YES	YES
Five lags of stock returns	YES	YES		YES	YES
Five lags of market returns		YES			YES
Stock fixed effects	YES	YES		YES	YES
Adjusted R-squared	0.06	0.06		0.05	0.05
Panel B: Future returns
	Full period: $X_t=Outbrea{k}_t$		Post-outbreak period: $X_t=dSprea{d}_t$
	(1)	(2)	(3)		(4)
$MkNew{s}_t$	−0.036 (−1.29)	−0.031 (−1.12)	−0.057** (−2.03)		−0.054* (−1.93)
$FmNew{s}_{i,t}$	0.044 (1.60)	0.040 (1.45)	0.059** (2.13)		0.056** (2.00)
$E{C}_{i,t}$	−0.055** (−1.99)	−0.051* (−1.85)	−0.048* (−1.74)		−0.046* (−1.66)
$X_t$	−0.062** (−2.24)	−0.057** (−2.07)	−0.055** (−1.98)		−0.052* (−1.90)
$MkNew{s}_t\times X_t$	−0.064** (−2.33)	−0.060** (−2.18)	−0.057** (−2.07)		−0.054** (−1.97)
$MkNew{s}_t\times X_t\times E{C}_{i,t}$	−0.055** (−2.00)	−0.053* (−1.92)	−0.051* (−1.84)		−0.048* (−1.75)
$FmNew{s}_{i,t}\times X_t$	0.060** (2.15)	0.056** (2.00)	0.055** (1.96)		0.052* (1.89)
$FmNew{s}_{i,t}\times X_t\times E{C}_{i,t}$	0.052* (1.88)	0.050* (1.79)	0.049* (1.76)		0.046* (1.67)
$MkNew{s}_t\times E{C}_{i,t}$ & $FmNew{s}_{i,t}\times E{C}_{i,t}$	YES	YES	YES		YES
Constant & $\Delta VI{X}_t$	YES	YES	YES		YES
Five lags of stock returns	YES	YES	YES		YES
Five lags of market returns		YES			YES
Stock fixed effects	YES	YES	YES		YES
Adjusted R-squared	0.03	0.03	0.03		0.03