Do Investors Learn to Be Optimistic from SARS Experiences? Stock Market Reactions during COVID-19 in OECD Countries

Posted: 6 Aug 2021

See all articles by Hao-Chang Sung

Hao-Chang Sung

Department of Business Administration, National Chung Cheng University

Shirley J. Ho

Department of Economics, National Chengchi University

Yun-Shiang Huang

Department of Economics, National Taiwan University

Hung-Wei Chang

Department of Economics, Duke University

Date Written: September 11, 2020

Abstract

Various explanations have been proposed for the departure of the stock market prices from the economic realities during the COVID-19 outbreak. This paper conjectures that the SARS experiences can also have contributions to the quick recovery in stock markets. We first use an asset-pricing model to show that the stock price is affected by short-term fundamentals and the expectations about stock market. Then, we use two terms to describe "fear of missing out effect" and "resemblance effect" from the SARS experiences. Our results confirm that SARS experiences have positive contributions to the quick recovery of stock markets during the first wave of COVID-19. Both the FOMO effect and resemblance effect are positively related to stock market recovery. These positive contributions are reinforced if a country has actual experiences in treating SARS patients. We also find that the resemblance effects on stock market recovery are higher than the FOMO effects.

Keywords: COVID-19; asset pricing; expectations; SARS experiences, fear of missing out

JEL Classification: G4

Suggested Citation

Sung, Hao-Chang and Ho, Shirley J. and Huang, Yun-Shiang and Chang, Hung-Wei, Do Investors Learn to Be Optimistic from SARS Experiences? Stock Market Reactions during COVID-19 in OECD Countries (September 11, 2020). Available at SSRN: https://ssrn.com/abstract=3898370

Hao-Chang Sung (Contact Author)

Department of Business Administration, National Chung Cheng University ( email )

No.168, Sec. 1, University Rd., Minhsiung,
Chiayi, 621301
Taiwan

Shirley J. Ho

Department of Economics, National Chengchi University ( email )

No. 64, Chih-Nan Road
Section 2
Wenshan, Taipei, 11623
Taiwan

Yun-Shiang Huang

Department of Economics, National Taiwan University ( email )

1 Sec. 4, Roosevelt Road
Taipei 106, 106
Taiwan

Hung-Wei Chang

Department of Economics, Duke University ( email )

100 Fuqua Drive
Durham, NC 27708-0204
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
311
PlumX Metrics