Asset Prices and Pandemics

58 Pages Posted: 13 May 2020 Last revised: 4 Sep 2020

See all articles by Jerome Detemple

Jerome Detemple

Boston University Questrom School of Business; Center for Interuniversity Research and Analysis on Organization (CIRANO)

Date Written: April 28, 2020


We examine the impact of pandemics propagation mechanisms on equilibrium prices, volatilities, risk premia, interest rate, wages and stock prices in an integrated epidemic-economy model with production. Two types of technologies are examined: a neo-classical technology and one capturing the notion of time-to-produce. Results show the interest rate displays cyclical behavior, wages tend to increase and stock prices can also cycle during an outbreak. The impact of a shelter-in-place policy with and without layoffs is examined. Equilibrium displays cycles under the welfare maximizing shelter-in-place policy.

Keywords: Pandemics, equilibrium, cycles, interest rate, price of risk, returns, wages, stock prices, shelter- in-place, optimal mitigation, welfare, COVID-19

JEL Classification: G10, G12, G19

Suggested Citation

Detemple, Jerome, Asset Prices and Pandemics (April 28, 2020). Available at SSRN: or

Jerome Detemple (Contact Author)

Boston University Questrom School of Business ( email )

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Center for Interuniversity Research and Analysis on Organization (CIRANO)

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