Finance

Pathology

Business

Archaeology

Social distance

Stock (firearms)

Disease

Coronavirus disease 2019 (COVID-19)

Infectious disease (medical specialty)

Pandemic

Financial economics

Outbreak

Virology

Economics

Geography

Stock exchange

Context (archaeology)

Stock market

Monetary economics

Medicine

Volatility (finance)

The Review of Asset Pricing Studies

No previous infectious disease outbreak, including the Spanish Flu, has affected the stock market as forcefully as the COVID-19 pandemic. In fact, previous pandemics left only mild traces on the U.S. stock market. We use text-based methods to develop these points with respect to large daily stock market moves back to 1900 and with respect to overall stock market volatility back to 1985. We also evaluate potential explanations for the unprecedented stock market reaction to the COVID-19 pandemic. The evidence we amass suggests that government restrictions on commercial activity and voluntary social distancing, operating with powerful effects in a service-oriented economy, are the main reasons the U.S. stock market reacted so much more forcefully to COVID-19 than to previous pandemics in 1918–1919, 1957–1958, and 1968.

The Unprecedented Stock Market Reaction to COVID-19