Abstract
Using industry portfolios as test assets and a battery of statistical tests, we study if the informational efficiency of stock prices has declined after the COVID-19 crisis began. The results suggest that the predictability of stock returns in some industries has increased during the COVID-19 period. Markets appear to have become less informationally efficient during the COVID-19 crisis.
 JEL Classification Code: C58, G01, G10, G14.
Highlights
As nations globally come to terms with a new world order instigated by the coronavirus crisis, the economic outlook in the short term looks uncertain and bleak
While there is a substantial literature studying the informational efficiency of different asset markets in a general context, little work exists on the impact of COVID-19 on stock market efficiency, presumably because the crisis is still ongoing
This study contributes to the literature on COVID-19 and financial markets by testing if market efficiency has declined during the COVID crisis
Summary
As nations globally come to terms with a new world order instigated by the coronavirus crisis, the economic outlook in the short term looks uncertain and bleak. We formally test if the stock markets have become more inefficient in light of the coronavirus crisis. The results suggest that the predictability of stock returns has increased during the COVID-19 crisis, but only for some industries.
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