When the Markets Get CO.V.I.D.: COntagion, Viruses, and Information Diffusion

Abstract

We quantify the exposure of major financial markets to news shocks about global contagion risk while accounting for local epidemic conditions. For a wide cross section of countries, we construct a novel dataset comprising (i) announcements related to COVID19 and (ii) high-frequency data on epidemic news diffused through Twitter (Hassan et al. 2019's methodology). We provide novel empirical evidence about financial dynamics both around epidemic announcements and at daily/intra-daily frequencies. Analysis of contagion data and social media activity about COVID19 suggest that the market price of contagion risk is significant.

Keywords: Asset Prices, Pandemic Risk, Medical Announcements, Text Analysis

JEL Classification: G12, G15, I10