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Dangerous infectious diseases: Bad news for Main Street, good news for Wall Street?

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  • Donadelli, Michael
  • Kizys, Renatas
  • Riedel, Max

Abstract

We examine whether investor mood, driven by World Health Organization (WHO) alerts and media news on dangerous infectious diseases, is priced in pharmaceutical companies' stocks in the United States. We argue that disease-related news (DRNs) should not trigger rational trading. We find that DRNs have a positive and significant sentiment effect among investors (on Wall Street). The effect is stronger (weaker) for small (large) companies, who are less (more) likely to engage in the development of new vaccines. A potential negative investor climate (on Main Street) – induced by disease-related fear – does not alter the positive sentiment effect.

Suggested Citation

  • Donadelli, Michael & Kizys, Renatas & Riedel, Max, 2017. "Dangerous infectious diseases: Bad news for Main Street, good news for Wall Street?," Journal of Financial Markets, Elsevier, vol. 35(C), pages 84-103.
    • Handle: RePEc:eee:finmar:v:35:y:2017:i:c:p:84-103
    DOI: 10.1016/j.finmar.2016.12.003
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    More about this item

    Keywords

    WHO alerts; Investor sentiment; Pharmaceutical industry; Trading strategies;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets

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