How did the US and UK markets react to the COVID-19 vaccines’ announcements? A preliminary assessment

Ethical considerations

The Research Committee at Canadian University Dubai exempted this study from the requirement of ethical approval as it does not involve the use of human, animal or plant data.

Data

We analyzed¹ the daily returns, cumulative returns, standard deviation and average returns across time intervals of interest related to the vaccines’ announcements. Time ranges are specified in the next section. The returns at a given time ‘t’ (r_t) are computed as a function of the current (${\text{Price}}_{\mathrm{t}})$ and previous day’s prices (${\text{Price}}_{\mathrm{t}-1}$), as follows:

whereas the cumulative returns (C_r) from period 1 to period T is given as follows:

Finally, the standard deviation (SD_r) is derived as shown below:

With regards to the US, we referred to the S&P500 Index during the period between 18 November 2020 to 19 February 2021. We retrieved the information relative to market prices using Yahoo Finance (Yahoo Finance 2021). The dates considered were motivated as follows: the first interval starts from 18 November 2020, when Pfizer announced their encouraging results about the vaccine. The second interval started on 11 December 2020, when the FDA authorized the Pfizer vaccine to be used in the US. The third interval started on 31 December 2020, when WHO authorized the use of the Pfizer vaccine.

Furthermore, for the US we considered the Dow Jones Industrial Average (DJIA), again accessed through Yahoo Finance, and looked at index movements around important events happening at the time of vaccine announcements. We further detailed our analysis by breaking our research period into 3 November 2020 to 9 November 2020, being the period of US Presidential elections; 10 November 2020 to 11 December 2020, corresponding to the first announcement by a pharmaceutical company to enter phase 3 of COVID-19 vaccine trials; finally, 12 December 2020 to 31 January 2021, corresponding to the announcement of the US FDA approval for emergency use of a COVID-19 vaccine, and post-announcement vaccine rollout.

When considering the UK, we inspected the FTSE 100 Index between 18 November to 19 February 2021. We retrieved the information relative to market prices from Yahoo Finance. The dates considered were motivated as follows. In a similar fashion as for the case of the US, the first interval started from 18 November, when Pfizer announced their encouraging results about their vaccine trials. The second interval starts on 24 November, when the Oxford-AstraZeneca news of successful vaccine trials was released.

US markets’ reaction

Results are presented in Table 1. Whilst the average of daily returns for the entire time period considered averaged 0.2%, it can be noticed that the cumulative returns definitely improved from 2.81% at the beginning of the period (18 November), up to 9.5% at the end of the period considered. Hence, it appears as the market took a few days to reflect the vaccine announcement dates.

It is important to notice that during the time period considered in this work, markets could have also been affected by the US election (Financial Times 2020). The presidential election took place on 3 November 2020, and on 14 December 2020, the winners were declared across the country. In Figure 1, we also present data relative to the DJIA, indicating key events around the US elections.

Figure 1. DJIA data and key events.

By assessing specific time intervals, the following should be noticed:

1) 3 November 2020 to 9 November 2020: The 2020 US Presidential elections were concluded with a change in evident administration. This was altogether seen as a positive development (The New York Times 2020²). However, there was growing uncertainty of the validity of the election results, which provided a lot of counter-arguments stating that the markets were volatile during the period (Chicago News 2021³).

2) 10 November 2020 to 11 December 2020: The Pfizer-BioNTech COVID-19 vaccine was announced to have completed phase 3 trials with a 95% efficacy in COVID-19 disease prevention. A surge of investment in the US stock markets could have been expected, particularly in the stocks of major pharmaceutical companies. However, only an increase of 3.05% and a standard deviation of 0.82% were observed, indicating that the market participants, though optimistic about the upcoming vaccine introduction, were pessimistic about the conclusion of the US Presidential power transfer.

3) 12 December 2020 to 31 January 2021: the Pfizer vaccine obtained emergency use authorization and began rolling out for the general public. However, there were several events that might have contributed, at least partially, in the negative returns for the period, which are as follows:

UK markets’ reaction

Results are presented in Table 2. It can be noticed that the cumulative returns improved significantly from negative 0.80% at the beginning of the period, compared to 3.74% at the end of the period considered. The average value of the daily returns, taking into consideration the entire period, is 0.03%. It appears that the market reacted swiftly to the news of successful trials, as average returns increased from −0.3% to 0.2%, and the standard deviation increased from 0.44 to 0.87.

Underlying data

Zenodo: ‘How did the US and UK markets react to the COVID-19 vaccines' announcements? A preliminary assessment’ https://doi.org/10.5281/zenodo.5733141 (Contu 2021).

The project contains the following underlying data:

Data are available under the terms of the Creative Commons Attribution 4.0 International license (CC-BY 4.0).