Market reactions to the arrival and containment of COVID-19: An event study

• We investigate short-term stock market reactions during the COVID-19 pandemic. • Stocks react significantly negatively to the announcement of the first death. • Stock markets react negatively to country-specific fiscal policy measures. • Monetary measures have the power to calm markets. We study the short-term market reactions of US and European stocks during the beginning of the COVID-19 pandemic. Employing an event study, we document that stocks react significantly negatively to the announcement of the first death in a given country. While our results suggest that the announcements of country-specific fiscal policy measures negatively affect stock returns, monetary policy measures have the potential to calm markets. These reactions are either intensified or lessened by firm-specific characteristics such as tangible assets, liquidity, and institutional holdings.