Stock Prices, Lockdowns, and Economic Activity in the Time of Coronavirus   [open pdf - 0B]

From the Introduction: "Stock markets cratered after mid-February in countries around the world, as the coronavirus pandemic spread beyond China. Value-weighted prices dropped 40 percent from 17 February to 23 March in the advanced economies. Emerging market and developing economies (EMDEs) saw an even steeper drop. This period also exhibits historically high levels of intraday, daily, and implied stock market volatilities against a backdrop of extraordinarily high economic uncertainty. [...] Our study relates closely to a rapidly growing literature on the dynamics of stock prices, economic activity, and policy actions during the coronavirus pandemic. [...] [W]e contribute by documenting the predictive content of national stock prices for near-future economic activity and by providing evidence that stock prices fall sharply with the stringency of lockdown measures, conditional on a battery of controls for pandemic severity, mobility, and the generosity of income support and debt relief policies."

Report Number:
Working Paper No. 2020-156
Becker Friedman Institute for Economics
Retrieved From:
Becker Friedman Institute for Economics: https://bfi.uchicago.edu/
Media Type:
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