Market reactions to Recovery Fund press releases during COVID-19: An event-study analysis

The Covid-19 pandemic imposes extraordinary policy interventions, like Recovery and Resilience Facility (RRF). This study find that: (i) investors perceive the RRF plan as a credible tool; (ii) several drivers related to trust, and sentiment explain the stock returns heterogeneity. •We study market reaction to Recovery and Resilience Facility announcements (RRF).•RRF announcements were able to boost financial markets.•Stock price reaction was driven by several micro and macro variables.•Sentiment and trust in institutions play a role in market response to RRF.•Overall, investors perceive RRF plan as a credible tool for post-pandemic recovery.