COVID-19 Vaccines and Global Stock Markets

38 Pages Posted: 16 Feb 2021 Last revised: 5 May 2022

See all articles by Kam Fong Chan

Kam Fong Chan

The University of Western Australia; Financial Research Network (FIRN)

Zhuo Chen

Tsinghua University - PBC School of Finance

Yuanji Wen

The University of Western Australia - Department of Accounting and Finance

Tong Xu

The University of Hong Kong - Faculty of Business and Economics

Date Written: November 15, 2021

Abstract

Global stock markets react positively when different phases of human clinical trials on COVID-19 vaccines begin. The average abnormal stock return on the first day of the trials is both statistically and economically significant at 8.08 basis points. The increase in the average abnormal stock return is threefold higher for leading vaccine candidates. The positive reaction is more pronounced upon the start of phase III trials, and it is also stronger for vaccine candidates developed by the U.S. and China. To explain the findings, we use a simple capital budgeting framework and show that stock markets convey important information about market-wide expectations on vaccine development that evolves along with the pandemic.

Keywords: COVID-19, pandemics, stock markets, vaccines

JEL Classification: G10, G14, I15

Suggested Citation

Chan, Kam Fong and Chen, Zhuo and Wen, Yuanji and Xu, Tong, COVID-19 Vaccines and Global Stock Markets (November 15, 2021). Available at SSRN: https://ssrn.com/abstract=3785533 or http://dx.doi.org/10.2139/ssrn.3785533

Kam Fong Chan

The University of Western Australia ( email )

35 Stirling Highway
Crawley, Western Australia 6009
Australia

Financial Research Network (FIRN) ( email )

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

Zhuo Chen

Tsinghua University - PBC School of Finance

No. 43, Chengdu Road
Haidian District
Beijing, Beijing 100083
China

Yuanji Wen

The University of Western Australia - Department of Accounting and Finance ( email )

School of Business
35 Stirling Highway
Crawley, Western Australia 6009
Australia

Tong Xu (Contact Author)

The University of Hong Kong - Faculty of Business and Economics ( email )

Pokfulam Road
Hong Kong
Hong Kong

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