 Efficient Markets Hypothesis in the time of COVID-19Evangelos Vasileiou
Review of Economic Analysis, 2021, vol. 13, issue 1, 45-63 Abstract: "This paper examines how the largest stock market of the world, the U.S., and particularly the S&P500 index, reacted during the COVID-19 outbreak (02.01.2020-30.04.2020). Using simple financial and corporate analysis (adopting Constant Growth Model) procedures for our theoretical framework, we juxtapose the released news with the respective market performance in order to examine if the stock market always incorporated the available information in time. We show that the market in some sub-periods was not moving as it was expected, and the runs-test statistically confirmed our assumptions that the US stock market was not efficient during the COVID-19 outbreak. We find that in some cases the market does not incorporate the news instantly, is irrational, and non-sensible. All these make the market’s behavior unpredictable for a rational asset pricing model because as this paper shows even the simplest financial theories could explain rational behavior, but the market presented a different performance. " Keywords: "Efficient Market Hypothesis; Rationality; Runs-test; Predictable Behavior; Constant Growth Model; COVID-19; Health Risk" (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:ren:journl:v:13:y:2021:i:1:p:45-63 Access Statistics for this article Review of Economic Analysis is currently edited by Dr. Jerzy (Jurek) Konieczny More articles in Review of Economic Analysis from Digital Initiatives at the University of Waterloo Library |
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