Stock Prices and Economic Activity in the Time of Coronavirus

Steven Davis, Dingqian Liu () and Xuguang Simon Sheng

No 28320, NBER Working Papers from National Bureau of Economic Research, Inc

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 35 countries in our sample, with notable departures in China, South Korea, and Taiwan. The size of the global stock market crash in reaction to the pandemic is many times larger than a standard asset-pricing model implies. Looking more closely at the world’s two largest economies, the pandemic had greater effects on stock market levels and volatilities in the U.S. than in China even before it became evident that early U.S. containment efforts would flounder. Newspaper-based narrative evidence confirms the dominant – and historically unprecedented – role of pandemic-related developments in the stock market behavior of both countries.

JEL-codes: E32 E44 E65 G12 G18 I18 (search for similar items in EconPapers)
Date: 2021-01
New Economics Papers: this item is included in nep-fmk and nep-mac
Note: AP EFG IFM PE
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Citations: View citations in EconPapers (17)

Published as Steven J. Davis & Dingqian Liu & Xuguang Simon Sheng, 2022. "Stock Prices and Economic Activity in the Time of Coronavirus," IMF Economic Review, vol 70(1), pages 32-67.

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