Feverish Stock Price Reactions to COVID-19
Stefano Ramelli and
Alexander Wagner
Additional contact information
Stefano Ramelli: University of Zurich - Department of Banking and Finance
No 20-12, Swiss Finance Institute Research Paper Series from Swiss Finance Institute
Abstract:
This paper studies how markets adjust to the sudden emergence of previously neglected risks. It does so by analyzing the stock price effects of the 2019 novel Coronavirus disease (COVID-19) pandemic. The telecom and health care industries did relatively well, while transportation and energy plummeted. Within industries, US firms reliant on Chinese inputs and those with a strong export orientation towards China suffered. Sophisticated investors appear to have started pricing in the effects of the virus already in the first part of January (the "Incubation" phase), that is, before managers or analysts started paying attention; the first earnings conference call that contained a discussion of "Coronavirus" took place on January 22. The "Outbreak" phase followed, during which China-oriented stocks and internationally oriented stocks more generally strongly underperformed. In the last week of February and early March (the "Fever" phase), the aggregate market first fell strongly and then entered a whipsaw pattern. But behind these feverish and seemingly behaviorally-driven price moves, some patterns emerge. In particular, investors became increasingly worried about corporate debt and liquidity, indicating widespread concerns that the health crisis may evolve into a financial crisis.
Keywords: Behavioral finance; Corporate debt; Coronavirus; COVID-19; Earnings conference calls; Event study; Global Value Chains; Neglected risks; Pandemic; SARS-CoV-2; Supply Chains (search for similar items in EconPapers)
JEL-codes: F15 F23 F36 G01 G02 G14 G15 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2020-03
New Economics Papers: this item is included in nep-cna, nep-fmk, nep-hea and nep-tra
References: Add references at CitEc
Citations: View citations in EconPapers (465)
Downloads: (external link)
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3550274 (application/pdf)
Related works:
Journal Article: Feverish Stock Price Reactions to COVID-19* (2020)
Working Paper: Feverish Stock Price Reactions to COVID-19 (2020)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp2012
Access Statistics for this paper
More papers in Swiss Finance Institute Research Paper Series from Swiss Finance Institute Contact information at EDIRC.
Bibliographic data for series maintained by Ridima Mittal (rps@sfi.ch).