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Vaccine Progress, Stock Prices, and the Value of Ending the Pandemic

Author

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  • Acharya, Viral
  • Johnson, Timothy
  • Zheng, Steven
  • Sundaresan, Suresh

Abstract

One measure of the ex ante cost of disasters is the welfare gain from shortening their expected duration. We introduce a stochastic clock into a standard disaster model that summarizes information about progress (positive or negative) towards disaster resolution. We show that the stock market response to duration news is essentially a sufficient statistic to identify the welfare gain to interventions that alter the state. Using information on clinical trial progress during 2020, we build contemporaneous forecasts of the time to vaccine deployment, which provide a measure of the anticipated length of the COVID-19 pandemic. The model can thus be calibrated from market reactions to vaccine news, which we estimate. The estimates imply that ending the pandemic would have been worth from 5% to 15% of total wealth as the expected duration varied in this period

Suggested Citation

  • Acharya, Viral & Johnson, Timothy & Zheng, Steven & Sundaresan, Suresh, 2023. "Vaccine Progress, Stock Prices, and the Value of Ending the Pandemic," CEPR Discussion Papers 18025, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:18025
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    More about this item

    Keywords

    Covid-19; Stock prices; Welfare costs; Vaccine News;
    All these keywords.

    JEL classification:

    • D6 - Microeconomics - - Welfare Economics
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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