How did the US and UK markets react to the COVID-19 vaccines’ announcements? A preliminary assessment

Abstract

Background: The COVID-19 pandemic has caused major public health and economic disruption. At the same time, a pandemic allows researchers to assess market efficiency; namely, whether, to what extent, and how swiftly stock markets incorporated information related to COVID-19. Soon after the outbreak of the pandemic, research on this front was conducted, with a particular focus on the United States of America (US) market. However, new major events linked to the pandemic have unfolded: a number of vaccines were announced and authorized. The research available in relation to market efficiency relative to vaccine availability is scant. The aim of this study was to assess market efficiency hypotheses with regards to the US and United Kingdom (UK) markets, investigating the impact of the promising news of the vaccines’ successful trials and, subsequently, their authorization. Methods: This work considered data from the S&P500 for the US market and the FTSE100 for the UK market. The time interval considered ranged from the date positive results of vaccines’ trials were first announced, 18 November 2020, until up to two months after the vaccines’ authorization that happened later in December 2020. For both markets, we analyzed the daily returns, cumulative returns, standard deviation and average returns. Results: In both the US and the UK, there was a positive effect of the vaccines’ announcements in terms of increase in the daily returns. However, the standard deviation was not found to increase substantially, notwithstanding the increase in the COVID-19 cases worldwide and the potential lockdown in several countries, as well as the fear from new coronavirus strains that the new vaccines might not be protect against. Conclusions: Whilst both markets displayed an increase in the average return following the vaccines’ announcements, the UK market seemed to reflect vaccines’ announcements faster than the US market.