Government intervention during the Covid-19 pandemic and stock volatility and liquidity: Evidence from France
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https://doi.org/10.54695/bmi.181.002Mots-clés:
Covid-19; stock liquidity; stock volatility; First and second waves of Covid-19; Panel analysisRésumé
In this paper, we examine the impact of government responses to Covid-19 pandemic on stock liquidity and volatility using data on the CAC40 index during the period from 22 January 2020 to 30 November 2020. We demonstrate that, at a stock level, the direct effect of policy actions on stock volatility and liquidity is more pronounced during the period of the first wave of the pandemic. When controlling for the size of the firm, we show that the influence of some stringency policies as well as the testing policy is weaker for larger firms. Our results also show that the indirect impact of these interventions on stock volatility weakens and even fades away during the second wave while it remains strong for stock liquidity. Our findings provide prominent implications for investors and policy makers.
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