A Shot in the Arm: The Effect of COVID-19 Vaccine News on Financial and Commodity Markets

We analyze the impact of COVID-19 vaccine announcements by leading vaccine companies on the financial and commodity markets from January to December 2020. We show that the vaccine announcements had varied and economically significant impacts on asset prices. The announcements moved interest rates, stock markets in the U.S. and numerous other countries as well as commodities used in transportation and some agricultural commodities. We show that the stock and commodity markets that experienced larger declines at the beginning of the pandemic receive a larger boost from good vaccine news. We also find that the vaccine news affects stock returns through changes in the expectations of the corporate cash flows and the expected equity risk premium.