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Health risk and the efficient market hypothesis in the time of COVID-19

Author

Listed:
  • Evangelos Vasileiou
  • Aristeidis Samitas
  • Maria Karagiannaki
  • Jagadish Dandu

Abstract

In this note, we show that the stock markets do not always incorporate all the available information because in many cases they slowly evaluate the news. Using simple statistical analysis, we show that the response of the markets to the available information in certain time periods is irrational and inefficient. The COVID-19 outbreak gives financial economists an example of health risk underestimation, and of an unexpectedly slow response during a stress period; issues that should be examined in the future under a behavioral view.

Suggested Citation

  • Evangelos Vasileiou & Aristeidis Samitas & Maria Karagiannaki & Jagadish Dandu, 2021. "Health risk and the efficient market hypothesis in the time of COVID-19," International Review of Applied Economics, Taylor & Francis Journals, vol. 35(2), pages 210-223, March.
    • Handle: RePEc:taf:irapec:v:35:y:2021:i:2:p:210-223
    DOI: 10.1080/02692171.2020.1864299
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    Cited by:

    1. Andrew Phiri, 2022. "Changing efficiency of BRICS currency markets during the COVID-19 pandemic," Economic Change and Restructuring, Springer, vol. 55(3), pages 1673-1699, August.
    2. Müller, Fernanda Maria & Santos, Samuel Solgon & Righi, Marcelo Brutti, 2023. "A description of the COVID-19 outbreak role in financial risk forecasting," The North American Journal of Economics and Finance, Elsevier, vol. 66(C).
    3. Pedro Antonio González & José Luis Gallizo, 2021. "Impact of COVID-19 on the Stock Market by Industrial Sector in Chile: An Adverse Overreaction," JRFM, MDPI, vol. 14(11), pages 1-24, November.
    4. Valentin Marian Antohi & Romeo Victor Ionescu & Monica Laura Zlati & Cristian Mirica & Nicoleta Cristache, 2022. "Approaches to Health Efficiency across the European Space through the Lens of the Health Budget Effort," IJERPH, MDPI, vol. 19(5), pages 1-20, March.
    5. Brajaballav Kar & Chandrabhanu Das, 2022. "Cryptocurrency Response to COVID-19: A Test of Efficient Market Hypothesis," Springer Proceedings in Business and Economics, in: Rabi Narayan Subudhi & Sumita Mishra & Abu Saleh & Dariush Khezrimotlagh (ed.), Future of Work and Business in Covid-19 Era, pages 9-18, Springer.
    6. Fernanda Maria Müller & Marcelo Brutti Righi, 2024. "Comparison of Value at Risk (VaR) Multivariate Forecast Models," Computational Economics, Springer;Society for Computational Economics, vol. 63(1), pages 75-110, January.
    7. Evangelos Vasileiou, 2021. "Explaining stock markets' performance during the COVID‐19 crisis: Could Google searches be a significant behavioral indicator?," Intelligent Systems in Accounting, Finance and Management, John Wiley & Sons, Ltd., vol. 28(3), pages 173-181, July.
    8. Ho, Tuan & Kim, Kirak & Li, Yang & Xu, Fangming, 2023. "Does real flexibility help firms navigate the COVID-19 pandemic?," The British Accounting Review, Elsevier, vol. 55(4).
    9. Hanmin Dong & Xiujie Tan & Si Cheng & Yishuang Liu, 2023. "COVID-19, recovery policies and the resilience of EU ETS," Economic Change and Restructuring, Springer, vol. 56(5), pages 2965-2991, October.
    10. Tiago F. A. Matos & João C. A. Teixeira & Tiago M. Dutra, 2023. "The contribution of macroprudential policies to banks' resilience: Lessons from the systemic crises and the COVID‐19 pandemic shock," International Review of Finance, International Review of Finance Ltd., vol. 23(4), pages 794-830, December.
    11. Müller, Fernanda Maria & Santos, Samuel Solgon & Gössling, Thalles Weber & Righi, Marcelo Brutti, 2022. "Comparison of risk forecasts for cryptocurrencies: A focus on Range Value at Risk," Finance Research Letters, Elsevier, vol. 48(C).

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