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What Drives Stocks during the Corona-Crash? News Attention vs. Rational Expectation

Nils Engelhardt (), Miguel Krause (), Daniel Neukirchen () and Peter Posch ()
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Nils Engelhardt: Faculty of Business and Economics, TU Dortmund University, Chair of Finance, Otto-Hahn-Str. 6, 44227 Dortmund, Germany
Miguel Krause: Faculty of Business and Economics, TU Dortmund University, Chair of Finance, Otto-Hahn-Str. 6, 44227 Dortmund, Germany
Daniel Neukirchen: Faculty of Business and Economics, TU Dortmund University, Chair of Finance, Otto-Hahn-Str. 6, 44227 Dortmund, Germany
Peter Posch: Faculty of Business and Economics, TU Dortmund University, Chair of Finance, Otto-Hahn-Str. 6, 44227 Dortmund, Germany

Sustainability, 2020, vol. 12, issue 12, 1-12

Abstract: We explore if the corona-crash 2020 was driven by news attention or rational expectations about the pandemic’s economic impact. Using a sample of 64 national stock markets covering 94% of the world’s GDP, we find the stock markets’ decline to be mainly associated with higher news attention and less with rational expectation. We estimate the economic cost from the news hype to amount to USD 3.5 trillion for the US and USD 200 billion on average for the rest of the G8 countries.

Keywords: corona-crash; news attention; investor expectation (search for similar items in EconPapers)
JEL-codes: Q Q0 Q2 Q3 Q5 Q56 O13 (search for similar items in EconPapers)
Date: 2020
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