“In this research, we show that large events of devastating nature to the economy can be considered as good news to some interest groups, such as stock market traders.”
– explain researchers Michael Donadelli [pictured], Renatas Kizys and Max Riedel in a new paper for the Journal of Financial Markets. In this case. the ‘large events of devastating nature’ are related to outbreaks of dangerous infectious diseases – which the team examine via correlations in Disease Related News items (DRNs) and stock market performance. They find that though outbreaks of dangerous infectious diseases are no doubt very bad news for some sections of society, for others, they can be seen as “exploitable investment opportunities” :
“We find that DRNs have a positive and significant sentiment effect among investors (on Wall Street).”
They hypothesize that the stock market opportunities might, for example, be related to vaccine development by pharmaceutical firms.
“Our findings are of utmost importance and practical usefulness for institutional and individual investors, portfolio managers, financial analysts, and pharmaceutical firms. Indeed, we identify a range of exploitable investment opportunities.”