TY - JOUR
T1 - The unprecedented stock market reaction to COVID-19
AU - Baker, Scott R.
AU - Bloom, Nicholas
AU - Davis, Steven J.
AU - Kost, Kyle
AU - Sammon, Marco
AU - Viratyosin, Tasaneeya
N1 - Funding Information:
We gratefully acknowledge financial support from the U.S. National Science Foundation [SES 1324257] and the University of Chicago's Booth School of Business.
Publisher Copyright:
© 2020 The Author(s). Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved.
PY - 2020/12/1
Y1 - 2020/12/1
N2 - 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.
AB - 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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U2 - 10.1093/rapstu/raaa008
DO - 10.1093/rapstu/raaa008
M3 - Review article
AN - SCOPUS:85097502384
SN - 2045-9920
VL - 10
SP - 742
EP - 758
JO - Review of Asset Pricing Studies
JF - Review of Asset Pricing Studies
IS - 4
ER -
