Stock Prices, Lockdowns, and Economic Activity in the Time of Coronavirus

62 Pages Posted: 19 Oct 2020

See all articles by Steven J. Davis

Steven J. Davis

University of Chicago; National Bureau of Economic Research (NBER); Hoover Institution

Dingqian Liu

American University - Department of Economics

Xuguang Simon Sheng

American University

Date Written: October 16, 2020

Abstract

Stock prices and workplace mobility trace out striking clockwise paths in daily data from mid- February to late May 2020. Global stock prices fell 30 percent from 17 February to 12 March, before mobility declined. Over the next 11 days, stocks fell another 10 percentage points as mobility dropped 40 percent. From 23 March to 9 April, stocks recovered half their losses and mobility fell further. From 9 April to late May, both stocks and mobility rose modestly. This dynamic plays out across the 31 countries in our sample, with a few notable exceptions. We also find strong evidence that stricter lockdown policies, both in-country and globally, drove large declines in national stock prices conditional on pandemic severity, workplace mobility, and income support and debt relief policies. A closer look at the two largest economies reveals greater pandemic effects on stock market levels and volatilities in the U.S. than in China. Narrative evidence confirms the dominant role of pandemic-related developments for stock prices in both countries. An event-study design finds mild evidence that Chinese policy actions propped up stock prices and stronger evidence that they raised market volatility.

Keywords: E32, E44, E65, G12, G18, I18

JEL Classification: stock prices, lockdown policies, market shutdowns, coronavirus, COVID-19, workplace mobility, China

Suggested Citation

Davis, Steven J. and Liu, Dingqian and Sheng, Xuguang Simon, Stock Prices, Lockdowns, and Economic Activity in the Time of Coronavirus (October 16, 2020). University of Chicago, Becker Friedman Institute for Economics Working Paper No. 2020-156, Available at SSRN: https://ssrn.com/abstract=3714028 or http://dx.doi.org/10.2139/ssrn.3714028

Steven J. Davis (Contact Author)

University of Chicago ( email )

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National Bureau of Economic Research (NBER)

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Hoover Institution

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Dingqian Liu

American University - Department of Economics ( email )

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Xuguang Simon Sheng

American University ( email )

4400 Massachusetts Avenue, N.W.
Washington, DC 20016-8029
United States

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