Coronavirus: Impact on Stock Prices and Growth Expectations? - Ralph Koijen

Finance

Speaker : Ralph Koijen

Videoconference

We use data from the aggregate equity market and dividend futures to quantify how investors’ expectations about economic growth across horizons evolve in response to the coronavirus outbreak and subsequent policy responses. Dividend futures, which are claims to dividends on the aggregate stock market in a particular year, can be used to directly compute a lower bound on growth expectations across maturities or to estimate expected growth using a simple forecasting model. We show how data on dividend futures can be used to understand why stock markets fell so sharply, well beyond changes in growth expectations.