Vaccine Progress, Stock Prices, and the Value of Ending the Pandemic

Viral V. Acharya (), Timothy Johnson, Suresh Sundaresan () and Steven Zheng ()
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Viral V. Acharya: Stern School of Business, NBER, and CEPR, New York University, New York, New York 10012
Timothy Johnson: University of Illinois at Urbana-Champaign, Champaign, Illinois 61820
Suresh Sundaresan: Graduate School of Business, Columbia University, New York, New York 10027
Steven Zheng: Graduate School of Business, Columbia University, New York, New York 10027

Management Science, 2025, vol. 71, issue 3, 2714-2732

Abstract: One measure of the ex ante cost of disasters is the welfare gain from shortening their expected duration. We introduce a stochastic clock into a standard disaster model that summarizes information about progress (positive or negative) toward disaster resolution. We show that the stock market response to duration news is essentially a sufficient statistic to identify the welfare gain to interventions that alter the state. Using information on clinical trial progress during 2020, we build contemporaneous forecasts of the time to vaccine deployment, which provide a measure of the anticipated length of the COVID-19 pandemic. The model can thus be calibrated from market reactions to vaccine news, which we estimate. The estimates imply that ending the pandemic would have been worth from 5% to 15% of total wealth as the expected duration varied in this period.

Keywords: COVID-19; welfare costs; stock prices; vaccine development; regime-switching (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:71:y:2025:i:3:p:2714-2732

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