The Financial Pandemic: COVID-19 and Policy Interventions on Rational and Irrational Markets

49 Pages Posted: 3 May 2020

See all articles by Savva Shanaev

Savva Shanaev

University of Northumbria at Newcastle

Arina Shuraeva

University of Northumbria at Newcastle; University of London

Binam Ghimire

University of Northumbria at Newcastle

Date Written: April 30, 2020

Abstract

Financial markets are useful indicators of public beliefs and dispersed knowledge on future outcomes and policy efficiency, especially in periods of uncertainty. 51 national stock markets successfully absorb publicly available information regarding COVID-19 and anticipate policy measures being taken to address the pandemic. The financial markets imply national lockdown policies, as well as monetary or fiscal stimuli, are counterproductive measures while targeted regional lockdowns can be effective. The fundamental effect of the pandemic is relatively low, sentiment and irrational panic play a greater role, while the most significant drivers of negative stock returns are policy interventions.

Keywords: COVID-19, event studies, policy intervention, financial market, efficient market hypothesis, SIR model

JEL Classification: E44, E63, G14, G15, G18, I18

Suggested Citation

Shanaev, Savva and Shuraeva, Arina and Ghimire, Binam, The Financial Pandemic: COVID-19 and Policy Interventions on Rational and Irrational Markets (April 30, 2020). Available at SSRN: https://ssrn.com/abstract=3589557 or http://dx.doi.org/10.2139/ssrn.3589557

Savva Shanaev (Contact Author)

University of Northumbria at Newcastle ( email )

Pandon Building
208, City Campus East-1
Newcastle-Upon-Tyne, Newcastle NE1 8ST
United Kingdom

Arina Shuraeva

University of Northumbria at Newcastle ( email )

Pandon Building
208, City Campus East-1
Newcastle-Upon-Tyne, Newcastle NE1 8ST
United Kingdom

University of London ( email )

Senate House
Malet Street
London, WC1E 7HU
United Kingdom

Binam Ghimire

University of Northumbria at Newcastle ( email )

Pandon Building
208, City Campus East-1
Newcastle-Upon-Tyne, Newcastle NE1 8ST
United Kingdom

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