The Unprecedented Stock Market Reaction to COVID-19 | Zendy

Scott Baker | Zendy; Nicholas Bloom | Zendy; Steven J. Davis | Zendy; Kyle Kost | Zendy; Marco Sammon | Zendy; Tasaneeya Viratyosin | Zendy

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The Unprecedented Stock Market Reaction to COVID-19

Author(s) -

Scott Baker,

Nicholas Bloom,

Steven J. Davis,

Kyle Kost,

Marco Sammon,

Tasaneeya Viratyosin

Publication year - 2020

Publication title -

the review of asset pricing studies

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 4.356

H-Index - 19

eISSN - 2045-9939

pISSN - 2045-9920

DOI - 10.1093/rapstu/raaa008

Subject(s) - pandemic , stock market , covid-19 , stock (firearms) , stock exchange , financial economics , social distance , volatility (finance) , business , economics , outbreak , monetary economics , virology , finance , geography , infectious disease (medical specialty) , disease , medicine , context (archaeology) , archaeology , pathology

No previous infectious disease outbreak, including the Spanish Flu, has affected the stock market as forcefully as the COVID-19 pandemic. In fact, previous pandemics left only mild traces on the U.S. stock market. We use text-based methods to develop these points with respect to large daily stock market moves back to 1900 and with respect to overall stock market volatility back to 1985. We also evaluate potential explanations for the unprecedented stock market reaction to the COVID-19 pandemic. The evidence we amass suggests that government restrictions on commercial activity and voluntary social distancing, operating with powerful effects in a service-oriented economy, are the main reasons the U.S. stock market reacted so much more forcefully to COVID-19 than to previous pandemics in 1918–1919, 1957–1958, and 1968.

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