The Coronavirus Effect on the Stock Market
By: Andrea Ialenti
Tags: Economics, Data, Time Series Analysis, Data Science, News

In these initial months of 2020 the world is facing one of the biggest threats of recent history: a new coronavirus is spreading all over the globe, with the potential of becoming pandemic.

When it comes to a plague, the main thing to worry about is health and for all the information about COVID-19 my advice is to follow the WHO website, which contains the most up-to-date and reliable information about this new disease.

Another scary aspect, though, is the effect that the Coronavirus outbreak will have on the world’s economy: many analysts believe that the contagion could have serious negative fallbacks (even in the long term).

In this article I focused on the economic side of the problem: what is the effect that COVID-19 is having on the stock market? What are the events that have been perceived as the most important by the investors? What’s the role of Media? Let’s have a look at the big picture through a few charts.

The Data

The Coronavirus outbreak is an evolving situation: every 5 minutes there’s a news that helps to better define the problem and it’s very hard to stay on top of it. The whole matter, though, has been punctuated by various events. I have found this page that reports (and updates) the main facts since the beginning of the contagion; from that list I‘ve selected those elements that I’ve considered the most important for my analysis:

2019-12-31 => "First cases detected in China"

2020-01-01 => "Wuhan market identified as outbreak hub"

2020-01-03 => "Passengers screened at Wuhan Airport"

2020-01-06 => "SARS, MERS and bird flu ruled out"

2020-01-07 => "Virus identified as coronavirus 2019n-CoV"

2020-01-09 => "Coronavirus genome sequence released"

2020-01-11 => "First coronavirus death reported"

2020-01-15 => "First confirmed coronavirus case in Japan"2020-01-2020-01-17 => "US has initiated screening of passengers arriving from Wuhan"

2020-01-20 => "Safety measures at major international airports"

2020-01-21 => "US confirms first coronavirus case"

2020-01-22 => "WHO hold on declaring international health emergency"

2020-01-23 => "China implements travel bans"

2020-01-24 => "Starts building temporary hospital"

2020-01-26 => "WHO changes risk to 'high'"

2020-01-30 => "Russia closes 2,700 mile border"

2020-01-31 => "WHO declares global emergency"

2020-02-05 => "Japan confirms ten cases on cruise"

2020-02-09 => "COVID-19 overtakes SARS"

2020-02-12 => "Japan cruise cases increase to 174"

2020-02-13 => "Japan reports first COVID-19 death"

2020-02-19 => "New recoveries exceed new infections"

2020-02-21 => "Italy confirms fourth case"

2020-02-22 => "Italy reports one death"

2020-02-23 => "Italy records cases surge"

2020-02-27 => "Cases and deaths in Italy rise"

2020-02-28 => "WHO raises global outbreak risk to 'Very High'"

2020-02-29 => "The US reports first death"

2020-03-02 => "Deaths cross 3,000 globally, confirmed cases cross 89,000"

In terms of “what” to analyze, I have pulled several stock indices: S&P 500 (US), FTSE MIB (Italy), NIKKEI (Japan), SSE 50 (Shanghai), KOSPI (South Korea), STOXX50E (Eurozone), with the idea of observing how different markets reacted at the various events. Additional interesting data that I’ve pulled in my analysis is the VIX index, a popular measure of the stock market’s expectation of volatility based on S&P 500 index options. All of these information are coming from Yahoo Finance (Il Sole 24 Ore for the FTSE MIB dataset).

Another useful set of information is coming from the COVID-19 dataset that shows confirmed cases, deaths and recoveries for each day and for each country. I downloaded the Kaggle version.

Finally, I wanted to look at the effect of Media on this crisis. Unfortunately there was no easy way to access the latest news from all over the world, so I needed to collect the data myself. I ended up gathering the information from reddit.com, more precisely from the World News subreddit. I took the submissions titles (from the beginning of January 2019 through 6th March 2020) and checked whether they were talking about Coronavirus; I am conscious that this is a weak proxy for “how much Media are talking about it”, but it was the best that I could do. To collect the Reddit data, I used the pushshift.io APIs and the dataset is available at the link: https://gofile.io/?c=AW4NiM.

Main Events of the Outbreak for the Markets