Proximity to Covid-19 Cases and Real Estate Equity Returns

We conduct a quasi-natural experiment for Hong Kong to explore the spatial effects associated with proximity to Covid-19 infections on real estate equity performance. During the first months of the pandemic, Hong Kong reported daily roadmaps of Covid-19 cases. We use these to match with the locations of properties held by real estate companies. Using a difference-in-differences spatial discontinuity model, we find that real estate firms which own a property within 0.1 miles from an infectious site are associated with 0.23% significantly lower daily returns one day after the news. We find evidence for spillover effects for up to two miles from the Covid-19 case, and more pronounced effects on small firms. The paper provides novel findings about the spatial effects of Covid-19 news on stock markets.