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The impact of the SARS-CoV-2 pandemic on financial markets: a seismologic approach.
Spelta, Alessandro; Pecora, Nicolò; Flori, Andrea; Giudici, Paolo.
  • Spelta A; Department of Economics and Management, University of Pavia, Via San Felice, 5, 27100 Pavia, Italy.
  • Pecora N; Department of Economics and Social Sciences, Catholic University, Via Emilia Parmense, 84, 29122 Piacenza, Italy.
  • Flori A; Department of Management, Economics and Industrial Engineering, Polytechnic of Milan, Via Lambruschini, 4/B, 20156 Milan, Italy.
  • Giudici P; Department of Economics and Management, University of Pavia, Via San Felice, 5, 27100 Pavia, Italy.
Ann Oper Res ; : 1-26, 2021 May 14.
Article in English | MEDLINE | ID: covidwho-1384496
ABSTRACT
This work investigates financial volatility cascades generated by SARS-CoV-2 related news using concepts developed in the field of seismology. We analyze the impact of socio-economic and political announcements, as well as of financial stimulus disclosures, on the reference stock markets of the United States, United Kingdom, Spain, France, Germany and Italy. We quantify market efficiency in processing SARS-CoV-2 related news by means of the observed Omori power-law exponents and we relate these empirical regularities to investors' behavior through the lens of a stylized Agent-Based financial market model. The analysis reveals that financial markets may underreact to the announcements by taking a finite time to re-adjust prices, thus moving against the efficient market hypothesis. We observe that this empirical regularity can be related to the speculative behavior of market participants, whose willingness to switch toward better performing investment strategies, as well as their degree of reactivity to price trend or mispricing, can induce long-lasting volatility cascades.
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Full text: Available Collection: International databases Database: MEDLINE Type of study: Experimental Studies Language: English Journal: Ann Oper Res Year: 2021 Document Type: Article Affiliation country: S10479-021-04115-Y

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Full text: Available Collection: International databases Database: MEDLINE Type of study: Experimental Studies Language: English Journal: Ann Oper Res Year: 2021 Document Type: Article Affiliation country: S10479-021-04115-Y