Claremont Mckenna College’s scientific contributions

The 1918-1919 Spanish Flu represented the biggest worldwide health threat prior to the 2020 coronavirus pandemic. Although its mortality effects have been widely studied, much less has been done to assess its economic and financial impact. This mini review incorporates findings from recent studies of the Spanish Flu's effect on economic performance and stock market performance in the United States and worldwide. Although US impacts may have been very short-lived, more pervasive effects seem evident in other countries. It also appears that contemporary stock market participants reacted significantly, and negatively, to the surging death rates that were seen during the Spanish Flu.

The potential connections between macroeconomic variables and the stock market becomes less straightforward for shares issued in one country but traded in another. Whereas past work has suggested that cross-listed stocks respond to country-specific sentiment factors in the location of trade, in this paper we show how Chinese ADRs also generally respond more to US macroeconomic developments than to home-country influences. Following the application of Markov-switching analysis, we find that Chinese macroeconomic effects become relatively more important during times of crisis, however. Particularly large responses to Chinese macroeconomic variables are seen in the case of a Chinese closed-end fund that trades in the United States, but invests directly in Shanghai A-shares.