Abstract
Global stock markets react positively when different phases of human clinical trials on COVID-19 vaccines begin. The average abnormal stock return on the first day of the trials is both statistically and economically significant at 8.08 basis points. The increase in the average abnormal stock return is threefold higher for leading vaccine candidates. The positive reaction is more pronounced upon the start of phase III trials, and it is also stronger for vaccine candidates developed by the U.S. and China. To explain the findings, we use a simple capital budgeting framework and show that stock markets convey important information about market-wide expectations on vaccine development that evolves along with the pandemic.
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