I think one key question, when talking about the EMH, is what we mean for an information to be available.
It’s plausible, that for the public it only became clear around 27. February that Covid19 would be huge.
But it seems some experts knew much earlier. Just a quick browse on epidemiological twitter, for example, and you can find quitesomeinstances of people expecting this not to be contained in the beginning of February. There’s also the case of a swiss epidemiologist who was one of the first to warn swiss national media about Covid19 and claims to have sold all his stocks on January 21 in order to avoid losses from the outbreak.
One reason why you might not regard this information as available, is because it’s costly. In order to profit from it, you need to spend time and effort in order to receive and understand the information. I don’t think that is super plausible, given large banks and corporations with substantial research budgets.
Maybe these researchers were just lucky, there were certainly other researchers at this time who were far less concerned. But given that the information existed with at least some authority and was quite available, I would have expected the markets to at least somewhat react before mid-january.
Markets did react just about as soon as COVID started making the American news. If you look at VIX, which is an index of S&P500 futures volatility (aka the “fear index”), it jumped to a new, higher plateau right as COVID-19 started making the news in mid-January.
Hm, all I can find are these small bumps in the end of January. [But I can’t figure out how to attach screenshots here.] I also can’t really see a plateau effect afterwards. An actual reaction, from a cursory view, only seems to happen on the 20. February. I’m not capable of saying whether these bumps show a market reaction or if it’s largely noise. Looking at the time before, it doesn’t seem like an unusual behaviour. [But I’m really not good at properly reading such charts, so I’d be interested in how you came to your conclusions.]
Hmm, maybe you are right. I had a discussion about this in regards to another one of my posts about COVID-19 and the stock market, but now that I’m looking again I don’t really see anything like what I was describing.
The steelman that VIX responded to COVID-19 in January is that it went up 40% from Jan 23-27. For whatever reason, this chart makes it easier to see the bump I’m talking about. It’s not dramatic compared with the explosion in mid-Feb, but that accords with the idea that the market was unsure about whether COVID-19 was going to be a replay of SARS or something much worse, and didn’t decide until the hard evidence came in of international community spread on Feb. 21.
I think one key question, when talking about the EMH, is what we mean for an information to be available.
It’s plausible, that for the public it only became clear around 27. February that Covid19 would be huge.
But it seems some experts knew much earlier. Just a quick browse on epidemiological twitter, for example, and you can find quite some instances of people expecting this not to be contained in the beginning of February. There’s also the case of a swiss epidemiologist who was one of the first to warn swiss national media about Covid19 and claims to have sold all his stocks on January 21 in order to avoid losses from the outbreak.
One reason why you might not regard this information as available, is because it’s costly. In order to profit from it, you need to spend time and effort in order to receive and understand the information. I don’t think that is super plausible, given large banks and corporations with substantial research budgets.
Maybe these researchers were just lucky, there were certainly other researchers at this time who were far less concerned. But given that the information existed with at least some authority and was quite available, I would have expected the markets to at least somewhat react before mid-january.
Markets did react just about as soon as COVID started making the American news. If you look at VIX, which is an index of S&P500 futures volatility (aka the “fear index”), it jumped to a new, higher plateau right as COVID-19 started making the news in mid-January.
Hm, all I can find are these small bumps in the end of January. [But I can’t figure out how to attach screenshots here.] I also can’t really see a plateau effect afterwards. An actual reaction, from a cursory view, only seems to happen on the 20. February. I’m not capable of saying whether these bumps show a market reaction or if it’s largely noise. Looking at the time before, it doesn’t seem like an unusual behaviour. [But I’m really not good at properly reading such charts, so I’d be interested in how you came to your conclusions.]
Hmm, maybe you are right. I had a discussion about this in regards to another one of my posts about COVID-19 and the stock market, but now that I’m looking again I don’t really see anything like what I was describing.
The steelman that VIX responded to COVID-19 in January is that it went up 40% from Jan 23-27. For whatever reason, this chart makes it easier to see the bump I’m talking about. It’s not dramatic compared with the explosion in mid-Feb, but that accords with the idea that the market was unsure about whether COVID-19 was going to be a replay of SARS or something much worse, and didn’t decide until the hard evidence came in of international community spread on Feb. 21.