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

Viral Acharya, Timothy Johnson, Suresh Sundaresan and Steven Zheng

No 18025, CEPR Discussion Papers from C.E.P.R. Discussion Papers

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) towards 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; Stock prices; Welfare costs; Vaccine News (search for similar items in EconPapers)
JEL-codes: D6 D8 E21 E32 Q54 (search for similar items in EconPapers)
Date: 2023-03
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