Impact of COVID-19 on market efficiency

Journal of Accounting Literature (

27 Pages Posted: 27 Nov 2023 Last revised: 20 Jun 2024

Date Written: June 20, 2024


Purpose. COVID-19 and its accompanying lockdowns were arguably the most traumatic events of our times. This paper investigates the impact of COVID-19 on market efficiency. 
Methodology. I analyze all publicly traded U.S. equities for 2014 - September 2021, using intraday data from TAQ, TRACE, I/B/E/S, and Capital IQ and daily data from CRSP, Thomson Reuters, Compustat, CRSP-Compustat Merged Database, and FRED, using a controlled contrast between absolute abnormal returns for relevant halfhours versus absolute abnormal returns in control halfhours, measured by the negative of the coefficient of the fixed effect of the interaction between the indicator variable, and as the case maybe, ticker and/or time period of interest, in the regression of halfhour-level absolute abnormal returns on tickers, months, and interactions. 
Findings. Using two separate objective, systematic, independent, and ordinal per se measures of market efficiency based upon market reactions separately to key developments and earnings announcements, I find that U.S. equities markets were statistically and economically significantly less efficient during the first two-three months of the COVID-19 lockdowns. 
Originality. There has been no previous work done on the systematic and objective characterization of the impact of COVID-19 and associated lockdowns on market efficiency. 
Practical implications. Efficient capital markets provide substantial social benefits and are a sine qua non for the democratization of markets and the protection of investors, and constitute a critical mission of regulatory bodies such as the U.S. Securities and Exchange Commission (SEC) and the U.S. Financial Industry Regulatory Authority (FINRA). 
Social implications. The impact on market efficiency provides one critical input into the social cost-benefit analysis of public health policy and that of government interventions in general. 

Keywords: Intraday data, Event studies, Earnings announcements, Analyst forecasts, Key developments, Market efficiency, COVID-19, Big data in finance Paper type Research paper JEL Classification -G24, G32, G11, G12, G14, C58, C33

JEL Classification: G24; G32; G11; G12; G14; C58; C33.

Suggested Citation

Bhattacharya, Rajeev, Impact of COVID-19 on market efficiency (June 20, 2024). Journal of Accounting Literature (, Available at SSRN: or

Rajeev Bhattacharya (Contact Author)

Washington Finance and Economics ( email )

United States


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