Stock Market Efficiency During Major Health Crises: International Evidence

ABSTRACT In our research, we analyse the effects of six major global health crises on the stock markets across 38 regions, including both developed and emerging capital markets. We assess stock market efficiency through the lens of price delay. Diverging from the prevailing views in the literature, our findings suggest that pandemic periods are associated with improved stock price efficiency. This aligns with but challenges previous studies by offering new insights into the dynamic responses of financial markets during global health emergencies. Furthermore, we provide evidence consistent with the investor attention channel and the liquidity channel. We also observe that in regions with stronger government capacity, higher internal stability, and lower corruption levels, the improvement in price efficiency is more pronounced after pandemics. Our empirical results remain robust after endogeneity checks, generalized method of moments (GMM) estimation, using alternative measures of price efficiency, and updating data selection criteria. This research uncovers surprising impacts of pandemics on stock markets and provides valuable insights for investors and policymakers alike.