Do government interventions aimed at curbing the spread of COVID-19 affect stock market volatility? To answer this question, we explore the stringency of policy responses to the novel coronavirus pandemic in 67 countries around the world. We demonstrate that non-pharmaceutical interventions significantly increase equity market volatility. The effect is independent from the role of the coronavirus pandemic itself and is robust to many considerations. Furthermore, two types of actions that are usually applied chronologically particularly early—information campaigns and public event cancellations—are the major contributors to the growth of volatility.

The paper investigates the effects of oil price shocks on stock market volatility in Europe by focusing on three measures of volatility, i.e. the conditional, the realized and the implied volatility. The findings suggest that supply-side shocks and oil specific demand shocks do not affect volatility, whereas, oil price changes due to aggregate demand shocks lead to a reduction in stock market volatility. More specifically, the aggregate demand oil price shocks have a significant explanatory power on both current- and forward-looking volatilities. The results are qualitatively similar for the aggregate stock market volatility and the industrial sectors’ volatilities. Finally, a robustness exercise using short- and long-run volatility models supports the findings.

We examine whether investor mood, driven by World Health Organization (WHO) alerts and media news on dangerous infectious diseases, is priced in pharmaceutical companies' stocks in the United States. We argue that disease-related news (DRNs) should not trigger rational trading. We find that DRNs have a positive and significant sentiment effect among investors (on Wall Street). The effect is stronger (weaker) for small (large) companies, who are less (more) likely to engage in the development of new vaccines. A potential negative investor climate (on Main Street) – induced by disease-related fear – does not alter the positive sentiment effect.