The effect of COVID-19 on the stock market of the travel and leisure industry: Evidence from the United States

This study explores the impact of the COVID-19 pandemic upon the performance of the U.S. travel and leisure stock, using daily data sets from December 31, 2019, to December 2, 2020. Applying the multifactor model, which is an extension of the capital asset pricing model, the study examines how governmental announcements and policy measures to contain the pandemic situation impact the stock prices controlling for confirmed cases, growth rates, and death rates owing to the pandemic. Further, to reduce the potential bias in heterogeneity, crucial macroeconomic regressors such as oil prices, exchange rates, and a volatility index are included. The study obtains a heterogeneous impact across quantiles. Government stringency measures negatively impact the travel and leisure stock prices, while the announcement of economic support programs positively impacts the stocks, particularly at the high-end quantiles. We advocate that the introduction of asset-light and fee-based strategies will enable the firms to overcome the adverse implications of the pandemic in the long run. This study offers major insights for protecting and developing the recovery of the travel and leisure stock market by considering the importance of government interventions and their effective implementation.