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

Dangerous infectious diseases: Bad news for Main Street, good news for Wall Street?
Dangerous infectious diseases: Bad news for Main Street, good news for Wall Street?
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.
WHO alerts, investor sentiment, pharmaceutical industry, trading strategies
1386-4181
84-103
Donadelli, Michael
9836edb9-15f5-4bbc-9f57-cf4636285390
Kizys, Renatas
9d3a6c5f-075a-44f9-a1de-32315b821978
Riedel, Max
034230e7-021b-49c5-8885-b763d17342fa
Donadelli, Michael
9836edb9-15f5-4bbc-9f57-cf4636285390
Kizys, Renatas
9d3a6c5f-075a-44f9-a1de-32315b821978
Riedel, Max
034230e7-021b-49c5-8885-b763d17342fa

Donadelli, Michael, Kizys, Renatas and Riedel, Max (2017) Dangerous infectious diseases: Bad news for Main Street, good news for Wall Street? Journal of Financial Markets, 35, 84-103. (doi:10.1016/j.finmar.2016.12.003).

Record type: Article

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.

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Accepted/In Press date: 20 December 2016
e-pub ahead of print date: 26 December 2016
Published date: September 2017
Keywords: WHO alerts, investor sentiment, pharmaceutical industry, trading strategies

Identifiers

Local EPrints ID: 434042
URI: http://eprints.soton.ac.uk/id/eprint/434042
ISSN: 1386-4181
PURE UUID: 093bdcab-554f-4dc8-8c17-9a416d723e3c
ORCID for Renatas Kizys: ORCID iD orcid.org/0000-0001-9104-1809

Catalogue record

Date deposited: 11 Sep 2019 16:30
Last modified: 27 Apr 2022 02:14

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Contributors

Author: Michael Donadelli
Author: Renatas Kizys ORCID iD
Author: Max Riedel

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