Research / BFI Working PaperDec 29, 2020

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

Steven J. Davis, Dingqian Liu, Xuguang Simon Sheng

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 a few notable exceptions. We also find that stricter lockdown policies, both in-country and globally, drove larger declines in national stock prices conditional on pandemic severity, workplace mobility, and income support and debt relief policies. Looking more closely at the two largest economies, the pandemic had greater effects on stock market levels and volatilities in the U.S. than in China. Narrative evidence confirms the dominant – and historically unprecedented – role of pandemic-related developments for stock prices in both countries. The size of the global stock market crash in reaction to the pandemic is many times larger than a standard asset-pricing model implies.

Additional Materials

More Research From These Scholars

BFI Working Paper Jun 29, 2020

Economic Uncertainty Before and During the COVID-19 Pandemic

Dave Altig, Scott Baker, Jose Maria Barrero, Nick Bloom, Phil Bunn, Scarlet Chen, Steven J. Davis, Brent Meyer, Emil Mihaylov, Paul Mizen, Nick Parker, Thomas Renault, Pawel Smietanka, Greg Thwaites
Topics:  COVID-19
BFI Working Paper Aug 28, 2019

Rising Policy Uncertainty

Steven J. Davis
Topics:  Monetary Policy, COVID-19
BFI Working Paper Jan 1, 2016

Regulatory Complexity and Policy Uncertainty: Headwinds of Our Own Making

Steven J. Davis
Topics:  Financial Markets, Monetary Policy