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When the Markets Get COVID: COntagion, Viruses, and Information Diffusion


  • Croce, Mariano Massimiliano
  • Farroni, Paolo
  • Wolfskeil, Isabella


We quantify the exposure of major financial markets to news shocks about global contagion risk accounting for local epidemic conditions. For a wide cross section of countries, we construct a novel data set comprising (i) announcements related to COVID19, and (ii) high-frequency data on epidemic news diffused through Twitter. Across several classes of financial assets, we provide novel empirical evidence about {financial dynamics (i) around epidemic announcements, (ii) at a daily frequency, and (iii) at an intra-daily frequency.} Formal estimations based on both contagion data and social media activity about COVID19 confirm that the market price of contagion risk is very significant. We conclude that prudential policies aimed at mitigating either global contagion or local diffusion may be extremely valuable.

Suggested Citation

  • Croce, Mariano Massimiliano & Farroni, Paolo & Wolfskeil, Isabella, 2020. "When the Markets Get COVID: COntagion, Viruses, and Information Diffusion," CEPR Discussion Papers 14674, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:14674

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    References listed on IDEAS

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    1. Marco Pagano & Christian Wagner & Josef Zechner, 2020. "Disaster Resilience and Asset Prices," Papers 2005.08929,, revised May 2020.
    2. Costola, Michele & Iacopini, Matteo & Santagiustina, Carlo R.M.A., 2021. "On the “mementum” of meme stocks," Economics Letters, Elsevier, vol. 207(C).
    3. Iwanicz-Drozdowska, Małgorzata & Rogowicz, Karol & Kurowski, Łukasz & Smaga, Paweł, 2021. "Two decades of contagion effect on stock markets: Which events are more contagious?," Journal of Financial Stability, Elsevier, vol. 55(C).
    4. Suleman, Muhammad Tahir & Yaghoubi, Mona, 2022. "Infectious disease and corporate activities," Economics Letters, Elsevier, vol. 212(C).
    5. Velásquez, Jorge Sepúlveda & Griñen, Pablo Tapia & Henríquez, Boris Pastén, 2022. "Emerging market dynamics in H1N1 and COVID-19 pandemics," Economics Letters, Elsevier, vol. 218(C).
    6. Ricardo J Caballero & Alp Simsek, 2021. "A Model of Endogenous Risk Intolerance and LSAPs: Asset Prices and Aggregate Demand in a “COVID-19” Shock [Financial intermediaries and the cross-section of asset returns]," Review of Financial Studies, Society for Financial Studies, vol. 34(11), pages 5522-5580.
    7. Contessi, Silvio & De Pace, Pierangelo, 2021. "The international spread of COVID-19 stock market collapses," Finance Research Letters, Elsevier, vol. 42(C).
    8. Jean-Noël Barrot & Basile Grassi & Julien Sauvagnat, 2020. "Estimating the Costs and Benefits of Mandated Business Closures in a Pandemic," Working Papers hal-02896739, HAL.
    9. Hanke, Michael & Kosolapova, Maria & Weissensteiner, Alex, 2020. "COVID-19 and market expectations: Evidence from option-implied densities," Economics Letters, Elsevier, vol. 195(C).
    10. Ferragina, Anna Maria & Iandolo, Stefano, 2022. "Reacting to the economic fallout of the COVID-19: Evidence on debt exposure and asset management of Italian firms," Economic Analysis and Policy, Elsevier, vol. 75(C), pages 530-547.
    11. Michal Bernardelli & Zbigniew Korzeb & Pawel Niedziolka, 2021. "The banking sector as the absorber of the COVID-19 crisis’ economic consequences: perception of WSE investors," Oeconomia Copernicana, Institute of Economic Research, vol. 12(2), pages 335-374, June.
    12. Donato Masciandaro, 2020. "Ecb Helicopter Money: Economic And Political Economy Arithmetics," BAFFI CAREFIN Working Papers 20138, BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy.
    13. Wan, Zhao & Tian, Haowen, 2022. "The effect of the COVID-19 pandemic on information disclosure: Evidence from China," Economics Letters, Elsevier, vol. 217(C).
    14. Agarwalla, Sobhesh Kumar & Varma, Jayanth R. & Virmani, Vineet, 2021. "The impact of COVID-19 on tail risk: Evidence from Nifty index options," Economics Letters, Elsevier, vol. 204(C).
    15. Core, Fabrizio & De Marco, Filippo, 2021. "Public Guarantees for Small Businesses in Italy during Covid-19," CEPR Discussion Papers 15799, C.E.P.R. Discussion Papers.

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    More about this item


    asset prices; contagion; Epidemic;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G1 - Financial Economics - - General Financial Markets
    • I1 - Health, Education, and Welfare - - Health

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