Financial Markets and News about the Coronavirus

60 Pages Posted: 1 Apr 2020 Last revised: 15 Jun 2020

See all articles by Harry Mamaysky

Harry Mamaysky

Columbia University - Columbia Business School

Date Written: June 15, 2020

Abstract

I examine how financial markets interact with news about the COVID-19 pandemic. A twelve topic model optimizes the trade-off between number of topics and topic coherence. Using this model, I show that before mid-March 2020 markets react more to the same quantum of news when volatility is higher – a phenomenon I call hypersensitivity. Formal tests identify a structural break in mid-March, post which markets are no longer hypersensitive. In the hypersensitive stage, markets are overly volatile and overreact to news. Despite hypersensitivity, lagged prices better forecast future COVID-19 case counts than do lagged news.

Keywords: asset pricing; natural disasters; natural language processing

JEL Classification: G10, G14

Suggested Citation

Mamaysky, Harry, Financial Markets and News about the Coronavirus (June 15, 2020). Available at SSRN: https://ssrn.com/abstract=3565597 or http://dx.doi.org/10.2139/ssrn.3565597

Harry Mamaysky (Contact Author)

Columbia University - Columbia Business School ( email )

3022 Broadway
New York, NY 10027
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
577
Abstract Views
1,809
rank
54,022
PlumX Metrics